Strategy Report: August 2018 -Turkey Troubles

With US sanctions and shaky economic foundations, Turkey appears to be in trouble. I guess you know you are in trouble if Krugman trots out his "impose capital controls" line in the NYT.

The resulting price drop has made a lot of stocks quite attractive. I went in a bit early and used by my regular August investment amount to buy:

• ING at $13.77 (new position, 4-stars Morningstar, and 5% dividend)
• Santander (SAN)  added more at $5.06
• Lloyds (LYG) added more at $3.12
• Westpac (WBK) added more at $21.40

On hindsight a little bit early as prices are now off by another 2%. However, I only know how to average down so the price drop suits me. I will add more if the price drops 5% from my previous buying price.

I had already used some of my money set aside for regular monthly investment on some Capitaland (C31) under $3.30 (new position, 4-stars Morningstar, 3.6%+ yield, StockReports+ 8/10), and added a bit to Frasers Property (TQ5).

I suspect that there will be more buying opportunities this month.

Strategy Report: August 2018 - Property Counters instead of REITS?

In July, I dipped my toes and initiated a small position in Frasers Property Ltd (TQ5) when it dropped below $1.70. It briefly recovered but is now back under $1.70.

My portfolio is heavy on REITS and I don't own a single dedicated property counter. But it seems that property counters are currently worth a look compared to REITs, especially with the small correction due to the SG-property cooling measures.

As a dividend investor, I will look at the usual valuation metrics, the quality of the landbank etc, but in the end, I'm most interested in the dividend yield, payout ratio/dividend cover. And as is my habit, when I'm interested in a sector, I prefer not to go "all-in" on a single share but will try to build a position in a few counters. So far, the other counter that looks good is the venerable Capitaland (C31) with a dividend yield >3% and comes with the Morningstar "4-star rating". Morningstar prefers Capitaland to CityDev which suits me, because CityDev's dividend yield is too low for me.

Strategy Report: July 2018

Initiated position in HSI Tracker Funder ETF  (2800.HK). Yes, I get to hold even more HSBC (well represented in my FTSE 100 ETF as well), but this goes to show that there is a good variety of shares, from International Companies like HSBC and AIA, to HK conglomerates (CK Holdings), and various China H-shares. Holding Tencent is inevitable, but fortunately not too many tech stocks (eg: Baidu/Alibaba not included). Expense ratio at 0.15% is also lower than STI ETF's expense ratio. Dividend yield is consistently in excess of 3%, similar to STI ETF's yield.

Continuing to accumulate Aviva while it remains under £5, and topped up a few other LSE-listed shares.

Dividend Report: July 2018

Trying something new. Graph shows the 3 main currencies I collect dividends in. I also collect some A$ and now HK$ dividends, but the amount is really tiny.

Experimenting with 2 graphs. The second graph has a "total dividends in S$ line where I add everything up including A$ and HK$ converted to S$ terms"


S$26,443.31
US$4593.05
GBP2,863.61
A$611.34
HKD1,178
Approximate total in S$: $38,586.47 or $5,512.35 a month.

Notes:

Average dividend per month = total dividend collected / number of months in the year so far. Vanguard quarterly dividends reported on Jan/April/Jul/Oct

Which ETF?

Asia
My current focus is on accumulating Vanguard's FTSE Asia ex Japan High Dividend Yield ETF (3085.HK). It holds dividend stocks from China, Taiwan, Hong Kong, Singapore, Korea and other Asian countries and has an expense ratio of 0.35%, about the same as STI ETF. The index is characterised by a low P/E of 10.5x. Unlike a regular index that has Chinese tech stocks in their top holdings, this index has the low P/E Chinese banks as their top holdings, which is something I like. DBS, UOB, and OCBC, are also part of their top holdings. I am using FSMOne to buy 3085.HK as the commission is reason, in order to spread my portfolio amongst different custodians (i.e. not all foreign shares into IBKR).

UK
I will also continue to DCA Vanguard's FTSE 100 UK ETF  (VUKE)at a slower pace as it is already one of my top holdings.

Asia-Pac
I am also holding Vanguards FTSE Developed Asia Pacific ex Japan ETF (VDPX) and iShares Core MSCI Pacific ex-Japan ETF (CPJ1/CPXJ) as my top holdings. I group them together though there are differences. Vanguard includes Korea and iShares doesn't, and Vanguard declares dividends, iShares doesn't. I am currently doing DCA of CPXJ via Standard Chartered online trading, again, to spread out of foreign share custodians.

Europe
For Europe exposure, I unfortunately do not have much choices and I have settled for iShares Core Euro Stoxx 50 ETF (CS51) as it reinvests the dividends. European ETFs that declare dividends will do so in Euros, even if the ETF is listed in GBP (i.e. CS51).  I am holding the virtually identical DB X-trackers Euro Stoxx 50 (Acc) (XESC) ETF in SCB as I started off with XESC but later decided to go with CS51. I will continue to DCA Europe ETFs, maybe quarterly. I'm also considering the HK-listed Vanguard European ETF (3101.HK) as it pays dividends but in HKD. 

Emerging Markets
While I am vested in both iShares EM (EIMI) and Vanguards EM (VDEM) ETFs, I am not doing DCA. I think regional ETFs may be the way to go as countries may move from EM status to developed status and leave the index. For regional ETFs, countries usually don't move in and out of the index.

Commodities
As I have explained in another blogpost, I used Global X's Norway ETF as an oil proxy. Australia is also sort of an iron/industrial metals proxy.

Dividend Report: June 2018

More Dividends collected in June

Total dividends Jan-June

S$: $25,751.50
US$: $3,769.43
GBP: £1,474.34
A$: 526.83



Average dividends per month: Jan-June 2018
S$4291.92  [2017: $3514.72]
£256.72      [2017:  £187.12]

US$628.24  [2017:  US$423.21]

exchange rates used
2017 30 Jun
USD  1.3765  = S$582.55
GBP 1.7887  =  S$334.70
1.79
2018 30 Jun
USD 1.3626  =  S$856.04
GBP 1.7981  = S$461.61


2017 Monthly average = $4,431.97
2018 Monthy average =  $5,609.57

Percentage increase = 26.6%

Notes:

Average dividend per month = total dividend collected / number of months in the year so far. Vanguard quarterly dividends reported on Jan/April/Jul/Oct

Astrea IV 4.35% 10 year structured finance bonds

The retail tranche was very small compared to previous retail bonds I applied for (Frasers 3.65%, Perennial 4.65%). 

There was a lot of negativity in HWZ about this bond, but unfortunately, this did not prevent the bond from being oversubscribed by 7.4x. 

• Astrea class A-1 4.35% : 7.4x oversubscribed.
• Perennial 4.65% 3 yr: 9.8x oversubscribed.
• Frasers 3.65%: 3.9x oversubscribed

An "A rated" (i.e. Asf) security with 4.35% coupon is a higher yield than SGD Corporates with comparable 8-9 year maturities. In other words, if we are able to rely on the rating agencies that this is "investment grade", it is better value than existing bonds.

• Commerzbank SGD 2027 - Bid / Ask YTM - 4.529%/ 4.61% Fitch: BBB
• NAB SGD 2028 - Bid/ Ask YTM - 3.881% / 4.086% Not rated
• Lendlease SGD 2027 - Bid/Ask YTM - 3.844%/ 3.919% Fitch: BBB-
• Landesbank SGD 2027 - Bid/Ask YTM - 3.757%/ 3.85% Fitch: BBB

It is true that this is a complex instrument, but some of the complexity is due to the "safeguards" like the reserve account. But at the end of the day, that is what we rely on rating agencies who can run stress tests on fund flows (S&P's stress test was a 45% haircut to future distributions from the funds and 100% haircut to the private debt fund) to assess risk of default. 

https://www.spratings.com/documents/20184/769219/AstreaIVPteLtd/3e6b8f12-0a65-4246-97d4-57ef83752949

There are bloggers who think they can read the prospectus and decide for themselves whether a security is investment grade or not. I do not pretend to have such powers. 

I was only allocated 8,000. The allocation appears to favour the smaller investors which I suppose was the intent behind this issuing the bond.

My Perennial 4.65% is going to mature this year, I wonder what sort of mad rush there will be when they issue their replacement tranche....