Be a Dividend Investor

A dividend investors goal should be to generate a increasing stream of sustainanle dividend income, through careful selection of dividend growth stocks. Their investment plan must not be dependant on daily market fluctuations. I am not being overconfident but a dividend investor must be able to say confidently that "daily fluctuations have no bearing on my investment plan" because i have bought this stock at a great discount and will keep building on it for the next 10 or 20 years (through 2-3 market cycles). 

Dividend investors out there, do not worry because most of your stocks will keep sending you dividends quarterly or annually (as long as the company is well managed, increasing in profitability year after year. What is most important is to focus on quality dividend stocks and purchase them at attractive valuations. In Singapore's short history, there are very few stocks that i can think of which have actually raised their distributions for at least ten consequtive years and may continue to do so for the next ten years. 
Companies like Singtel pay out dividends regularly, and it has increased over the past 11 years. They actually are a bit unpredictible because in 2003 and 2009, there was no increase. While on some years, you would get Special dividends, which is awesome. 
Take away the special dividends and other distributions and just look at Interim/Final dividends over the last 11 years and take the average:

2002 >>> 2013
5.5c >>>> 16.8c (dividends increased average 10.8% annually)
Which is not bad right?

As dividend investors, we should try and avoid unpredictability. I firmly believe that a strong management team which focuses on consistently sharing a portion of the profits with investors in the form of dividends will continue doing so, as long as the business is able to support it. Dividend Ranking website is pretty good to do the research on dividend history:
http://www.dividendsranking.com/index.php

I pulled this one for KeppelCorp from the above website:

There are of course another part of the dividend equation. In Singapore you can invest in REITs or Business trusts which promise you regular dividends (90% payout for REITs). But REITs  are not the same as company stocks. They did not promise an increase in dividends over time, just that 90% of the profits will be payed out, which means if they profit less in the particular year, you get less. Obviously. So there is the risk of unpredictability.

You know i wish investing in dividend stocks could be so easy that you can just buy it  and close your eyes. But you cant do that. Investors need to periodically monitor the financial health of their stocks. It should not be very complicated once you have done initial background research on the business and shareholding structure. Fundamentals of the company do not change overnight. Singtel will most likely be in the telecom business the next 10 or 20 years. Keep an eye out for news related to the particular stock such as mergers and acquisitions, that could prove very profitable or spell disaster in the making.

The bottom line is this: Market fluctuations should not scare intelligent dividend investors, instead it should be used as opportunities to build on your portfolio or trim off some profit. Steep drop in prices for dividend paying stocks provide excellent entry points for long term wealth accumulation. Personal note, Watch out for these in the next crash: Singtel, Singpost KeppelCorp, Jardine related stocks or if interested overseas, Coca cola; Colgate; Procter & Gamble; Exxonmobil; Kimberly Clark; Unilever; Merck & Co; Sanofi Aventis; Eli Lilly; Johnson & Johnson. If you noticed, Healthcare stocks have pretty good dividend payout rates but they are slow growth stocks.  

Sell in May and Go Away...to China?

Its the time of the year when i usually do a re-assessment of my investment strategy and capital allocation in order to stay ahead of market cycles. I am guilty of holding onto some counters for way too long even after they have reached my target price. It seems most brokerage houses keep upgrading stocks and shifting their target higher and higher. One such example is Singtel, now its target is $4.20? sure, maybe but not in the short term. I had to take profit early and trust me Singtel will come down eventually to find support at a lower level before the final push to the $4 region. All of my REIT holdings are also above target prices, Genting seems to be under the bus at the moment so i shall have to wait longer for it to reach my target price.

Anyway in order to do capital relocation, i need to free up some money. Chinese stocks look super attractive at the moment, with such valuations one cannot resist. I am going to pick individual counters which are growth stocks and play the broader index to diversify. 

Another point, I know for a fact, battery technology we currently use is outdated (over a century old). Cant wait to say goodbye to the pencil batteries. Having worked on Lithium-Air batteries myself, next generation battery technology is headed towards leaner, paper thin, Lithium Ion batteries with a greater capacity and recyclability than any existing alkaline or lithium cadmium ion battery. Therefore, i invested in BYD, manufacturers of next generation lithium ion batteries, PV cells and Electric cars. They are registered on the HKSE since 2002. Even Warren Buffet himself bought a huge stake for himself, however i must say, his timing was way way off. But you know what, this is a long term play and he knows it. Small retail investors just dont have the sort of capital to throw around so our timing has to be at least accurate. 

*Additional note: Interestingly fellow blogger WealthBuch also started taking profits. Refer to posted link below:
http://wealthbuch.blogspot.sg/2013/05/taking-little-profit-off-table.html

Disclaimer: Same as usual, dont just take my word for it. Perform your due dilligence before making an investment decision.     

Current Investment Strategy

Referring to my previous post, the market is due for short-term correction worldwide. I feel that the bull market is not over yet, this is only a temporary correction. I am going to liquidate 50% of my holdings and prepare to load up on stocks with higher growth potential. I say 50% (in my case) because some of my holdings have actually surpassed their target price, being greedy, I did not sell them too early. For example Cache Logistics Industrial REIT, this one is way over my valuation, it seems trading houses keep upgrading it to BUY and raising their TP. I can understand why, they also cannot determine how much higher this stock might go. If you are happy with a decent 30% profit, lock in your profits before it starts to fall. 

The other 50% of my holdings are value stocks which i will accumulate for as long as i can.(e.g. Singtel, Starhub, HPH Trust, Ascott REIT). I also hold Hyflux for the long run, not because i love it too much to let go but because i got in at a higher buy price and have been dollar-cost-averaging it down to $1.50 since 2011. (One of my biggest error in judgement, but we learn from our mistakes don't we?) Remember Warren's rule number 1: Never lose Money. 

Disclaimer: I just wanted to put down my thoughts in this post, It should NOT be taken as a basis for making any specific investment decisions.