Seeking shelter in dividend-rich stocks

I thinl the definitive word is "could", and not "would" when it comes to paying out the yields as mentioend in this article! Buyer beware!

The Straits Times
Sep 5, 2011
Seeking shelter in dividend-rich stocks

By Jonathan Kwok

PARKING cash in dividend-rich stocks is looking like one smart way to go for investors seeking some shelter from the global economic uncertainty.

Remisiers such as Charles Chua said more clients have been buying high-yielding real estate investment and business trusts after the stock market crisis erupted last month.

'They decided to go into more stable stocks,' he said.

There is plenty of choice with several locally listed companies, business trusts and real estate investment trusts (Reits) able to pay dividends of about 10 per cent or even higher for this financial year, say dealers and analysts.

But as many analysts warn, there are often greater risks associated with higher returns.

There is no guarantee that the counters will be able to pay projected dividends or distributions, for one thing. A good number of them also pay out dividends or distributions in US dollars, which are likely to slide further against the Singapore dollar.

Higher yields also tend to come from small-cap companies as well as Reits and business trusts without large sponsors but all these could run into various financial troubles if another crisis hits.

Still, at first glance, the numbers based on Bloomberg data, which used analyst estimates for earnings and dividends, look tempting.

First Ship Lease (FSL) Trust and Pacific Shipping Trust, which are both in the shipping sector, offer among the highest returns, though they pay distributions in US dollars.

FSL Trust could offer a 16.2 per cent distribution yield this year, while Pacific Shipping Trust could offer 10 per cent.

Hutchison Port Holdings Trust could offer a 7.6 per cent yield but there is also foreign exchange risk involved as it declares payouts in Hong Kong dollars, which are tied to the greenback.

CitySpring Infrastructure Trust, another business trust, is expected to pay out over 13 per cent this year, but the firm is undergoing a rights issue so the yield may be diluted when more units are issued.

K-Green Trust, which holds a portfolio of waste-to-energy and Newater plants in Singapore, offers a yield of 8.3 per cent.

Although the trust has not announced any acquisitions since its listing last year, analysts point to its blue-chip sponsor Keppel Corp.

Reits holding industrial properties and with smaller sponsors tend to pay out better distributions. Aims Amp Capital Industrial Reit and Cambridge Industrial Trust are each expected to offer an 8.9 per cent yield this year.

Sabana Shari'ah Compliant Industrial Reit could give a 10 per cent yield, according to Bloomberg's data.

Industrial Reits backed by larger names are also not far behind. Mapletree Logistics Trust could offer 7.6 per cent and Mapletree Industrial Trust 6.8 per cent.

Reits from other real estate sectors can also give good yields.

Ascott Residence Trust, backed by CapitaLand, is set to offer a 7.8 per cent distribution yield, according to Bloomberg. Frasers Commercial Trust, which is backed by Fraser & Neave, could offer 7.3 per cent.

'We think there is less risk to the balance sheets (of Singapore Reits) today than during the global financial crisis,' said a recent note by UBS Investment Research.

'Compared to 2008 and 2009, when gearing was 33 to 54 per cent, balance sheets look more conservative today with 25 to 40 per cent gearing.'

While business trusts and Reits generally have more predictable cash flows and distribution policies which give analysts more confidence in predicting payouts, the game for companies is different.

But analysts are still tipping for handsome payouts from some firms.

Elec & Eltek could pay out dividends that would give a 10.9 per cent yield, but the payouts will be in US dollars. Technology firm Venture Corp is forecast to pay out dividends that will be 7.4 per cent of its share price.

One remisier said telco StarHub and media giant Singapore Press Holdings (SPH) have been the focus of queries from many investors.

StarHub could give 7 per cent, according to Bloomberg, while SPH could give a 6.1 per cent payout.

jonkwok@sph.com.sg

I like div stocks and hold biz trust CitySpring and KGT which I believe its infrastructure biz will be less volatile than REITS thus can expect reasonable stable yield year after year. REITS paying v.good yield now because of current property boom but property has its cycles. Infrastructure assets usually have long term contracts therefore can expect steady income till the current global economic uncertain blows over.

(05-09-2011, 06:21 AM)Musicwhiz Wrote: I thinl the definitive word is "could", and not "would" when it comes to paying out the yields as mentioend in this article! Buyer beware!

The Straits Times
Sep 5, 2011
Seeking shelter in dividend-rich stocks

By Jonathan Kwok

PARKING cash in dividend-rich stocks is looking like one smart way to go for investors seeking some shelter from the global economic uncertainty.

Remisiers such as Charles Chua said more clients have been buying high-yielding real estate investment and business trusts after the stock market crisis erupted last month.

'They decided to go into more stable stocks,' he said.

There is plenty of choice with several locally listed companies, business trusts and real estate investment trusts (Reits) able to pay dividends of about 10 per cent or even higher for this financial year, say dealers and analysts.

But as many analysts warn, there are often greater risks associated with higher returns.

There is no guarantee that the counters will be able to pay projected dividends or distributions, for one thing. A good number of them also pay out dividends or distributions in US dollars, which are likely to slide further against the Singapore dollar.

Higher yields also tend to come from small-cap companies as well as Reits and business trusts without large sponsors but all these could run into various financial troubles if another crisis hits.

Still, at first glance, the numbers based on Bloomberg data, which used analyst estimates for earnings and dividends, look tempting.

First Ship Lease (FSL) Trust and Pacific Shipping Trust, which are both in the shipping sector, offer among the highest returns, though they pay distributions in US dollars.

FSL Trust could offer a 16.2 per cent distribution yield this year, while Pacific Shipping Trust could offer 10 per cent.

Hutchison Port Holdings Trust could offer a 7.6 per cent yield but there is also foreign exchange risk involved as it declares payouts in Hong Kong dollars, which are tied to the greenback.

CitySpring Infrastructure Trust, another business trust, is expected to pay out over 13 per cent this year, but the firm is undergoing a rights issue so the yield may be diluted when more units are issued.

K-Green Trust, which holds a portfolio of waste-to-energy and Newater plants in Singapore, offers a yield of 8.3 per cent.

Although the trust has not announced any acquisitions since its listing last year, analysts point to its blue-chip sponsor Keppel Corp.

Reits holding industrial properties and with smaller sponsors tend to pay out better distributions. Aims Amp Capital Industrial Reit and Cambridge Industrial Trust are each expected to offer an 8.9 per cent yield this year.

Sabana Shari'ah Compliant Industrial Reit could give a 10 per cent yield, according to Bloomberg's data.

Industrial Reits backed by larger names are also not far behind. Mapletree Logistics Trust could offer 7.6 per cent and Mapletree Industrial Trust 6.8 per cent.

Reits from other real estate sectors can also give good yields.

Ascott Residence Trust, backed by CapitaLand, is set to offer a 7.8 per cent distribution yield, according to Bloomberg. Frasers Commercial Trust, which is backed by Fraser & Neave, could offer 7.3 per cent.

'We think there is less risk to the balance sheets (of Singapore Reits) today than during the global financial crisis,' said a recent note by UBS Investment Research.

'Compared to 2008 and 2009, when gearing was 33 to 54 per cent, balance sheets look more conservative today with 25 to 40 per cent gearing.'

While business trusts and Reits generally have more predictable cash flows and distribution policies which give analysts more confidence in predicting payouts, the game for companies is different.

But analysts are still tipping for handsome payouts from some firms.

Elec & Eltek could pay out dividends that would give a 10.9 per cent yield, but the payouts will be in US dollars. Technology firm Venture Corp is forecast to pay out dividends that will be 7.4 per cent of its share price.

One remisier said telco StarHub and media giant Singapore Press Holdings (SPH) have been the focus of queries from many investors.

StarHub could give 7 per cent, according to Bloomberg, while SPH could give a 6.1 per cent payout.

jonkwok@sph.com.sg

(07-09-2011, 06:30 PM)john Wrote: I like div stocks and hold biz trust CitySpring and KGT which I believe its infrastructure biz will be less volatile than REITS thus can expect reasonable stable yield year after year. REITS paying v.good yield now because of current property boom but property has its cycles. Infrastructure assets usually have long term contracts therefore can expect steady income till the current global economic uncertain blows over.

(05-09-2011, 06:21 AM)Musicwhiz Wrote: I thinl the definitive word is "could", and not "would" when it comes to paying out the yields as mentioend in this article! Buyer beware!

The Straits Times
Sep 5, 2011
Seeking shelter in dividend-rich stocks

By Jonathan Kwok

PARKING cash in dividend-rich stocks is looking like one smart way to go for investors seeking some shelter from the global economic uncertainty.

Remisiers such as Charles Chua said more clients have been buying high-yielding real estate investment and business trusts after the stock market crisis erupted last month.

'They decided to go into more stable stocks,' he said.

There is plenty of choice with several locally listed companies, business trusts and real estate investment trusts (Reits) able to pay dividends of about 10 per cent or even higher for this financial year, say dealers and analysts.

But as many analysts warn, there are often greater risks associated with higher returns.

There is no guarantee that the counters will be able to pay projected dividends or distributions, for one thing. A good number of them also pay out dividends or distributions in US dollars, which are likely to slide further against the Singapore dollar.

Higher yields also tend to come from small-cap companies as well as Reits and business trusts without large sponsors but all these could run into various financial troubles if another crisis hits.

Still, at first glance, the numbers based on Bloomberg data, which used analyst estimates for earnings and dividends, look tempting.

First Ship Lease (FSL) Trust and Pacific Shipping Trust, which are both in the shipping sector, offer among the highest returns, though they pay distributions in US dollars.

FSL Trust could offer a 16.2 per cent distribution yield this year, while Pacific Shipping Trust could offer 10 per cent.

Hutchison Port Holdings Trust could offer a 7.6 per cent yield but there is also foreign exchange risk involved as it declares payouts in Hong Kong dollars, which are tied to the greenback.

CitySpring Infrastructure Trust, another business trust, is expected to pay out over 13 per cent this year, but the firm is undergoing a rights issue so the yield may be diluted when more units are issued.

K-Green Trust, which holds a portfolio of waste-to-energy and Newater plants in Singapore, offers a yield of 8.3 per cent.

Although the trust has not announced any acquisitions since its listing last year, analysts point to its blue-chip sponsor Keppel Corp.

Reits holding industrial properties and with smaller sponsors tend to pay out better distributions. Aims Amp Capital Industrial Reit and Cambridge Industrial Trust are each expected to offer an 8.9 per cent yield this year.

Sabana Shari'ah Compliant Industrial Reit could give a 10 per cent yield, according to Bloomberg's data.

Industrial Reits backed by larger names are also not far behind. Mapletree Logistics Trust could offer 7.6 per cent and Mapletree Industrial Trust 6.8 per cent.

Reits from other real estate sectors can also give good yields.

Ascott Residence Trust, backed by CapitaLand, is set to offer a 7.8 per cent distribution yield, according to Bloomberg. Frasers Commercial Trust, which is backed by Fraser & Neave, could offer 7.3 per cent.

'We think there is less risk to the balance sheets (of Singapore Reits) today than during the global financial crisis,' said a recent note by UBS Investment Research.

'Compared to 2008 and 2009, when gearing was 33 to 54 per cent, balance sheets look more conservative today with 25 to 40 per cent gearing.'

While business trusts and Reits generally have more predictable cash flows and distribution policies which give analysts more confidence in predicting payouts, the game for companies is different.

But analysts are still tipping for handsome payouts from some firms.

Elec & Eltek could pay out dividends that would give a 10.9 per cent yield, but the payouts will be in US dollars. Technology firm Venture Corp is forecast to pay out dividends that will be 7.4 per cent of its share price.

One remisier said telco StarHub and media giant Singapore Press Holdings (SPH) have been the focus of queries from many investors.

StarHub could give 7 per cent, according to Bloomberg, while SPH could give a 6.1 per cent payout.

jonkwok@sph.com.sg

I disagree. The fact that both MIIF and Cityspring had to slash their dividends over the past 3 years and that their current unit price are no-where near their IPO price shows how risky such highly geared assets are. While their operations are sound, the B/S are exposed to the cyclical financing industry. Plus, Trust level strategy might be poor. So it depends trust to trust IMO. KGT earning yield isn't very attractive (around 3-4%) but it does reflect the AAA rating of the SG govt. What do you think ?

Nick beat me to it!

I love to make fun of sweeping statements from the media!

I can get hurt by following simplistic statements... (By the way, not everything that's said in the media are "true"; they are not "lies" too. Just half-truths...)

Not all blue-chips are good... Not all S-chips are bad... Not all REITs are the same... Not all business and infrastructure trusts are equal...

It's not the vehicle. It's the driver!

If I can buy a "worthless" penny stock at $0.01 cents and flip it to a greater fool at $0.02 cents, it's a 100% gain! Who's your daddy!?

But if I buy a super duper bluest of blue chip at $10.00, but can't find anyone else to off-load it to.... And the only way out is for me to sell at $9.00, who's the one carrying the baby? Hey! I must be the patsy who bought at the top! *&^%$##%^@!$%^

LOL!

Jared is right, 'not the vehicle, but the driver', provided the driver is nimble and get the timing right, which I'm not.

Speaking of timing, I had CitySpring too early to benefit its current low price. Now that the 11 for 20 Rights issue is out of the way and with a new CEO and Chairman, believe at $0.40 giving a yield of 8% p.a. is attractive.

K-Green is relative new in the market, but having Keppel behind it sud be reassuring.

Good to hold above 2 Infrastructure/Utilities Trusts at least until the current economic uncertainty is stabilised.

(07-09-2011, 09:30 PM)Jared Seah Wrote: Nick beat me to it!

I love to make fun of sweeping statements from the media!

I can get hurt by following simplistic statements... (By the way, not everything that's said in the media are "true"; they are not "lies" too. Just half-truths...)

Not all blue-chips are good... Not all S-chips are bad... Not all REITs are the same... Not all business and infrastructure trusts are equal...

It's not the vehicle. It's the driver!

If I can buy a "worthless" penny stock at $0.01 cents and flip it to a greater fool at $0.02 cents, it's a 100% gain! Who's your daddy!?

But if I buy a super duper bluest of blue chip at $10.00, but can't find anyone else to off-load it to.... And the only way out is for me to sell at $9.00, who's the one carrying the baby? Hey! I must be the patsy who bought at the top! *&^%$##%^@!$%^

LOL!

(08-09-2011, 12:58 PM)john Wrote: Jared is right, 'not the vehicle, but the driver', provided the driver is nimble and get the timing right, which I'm not.

Speaking of timing, I had CitySpring too early to benefit its current low price. Now that the 11 for 20 Rights issue is out of the way and with a new CEO and Chairman, believe at $0.40 giving a yield of 8% p.a. is attractive.

K-Green is relative new in the market, but having Keppel behind it sud be reassuring.

Good to hold above 2 Infrastructure/Utilities Trusts at least until the current economic uncertainty is stabilised.

(07-09-2011, 09:30 PM)Jared Seah Wrote: Nick beat me to it!

I love to make fun of sweeping statements from the media!

I can get hurt by following simplistic statements... (By the way, not everything that's said in the media are "true"; they are not "lies" too. Just half-truths...)

Not all blue-chips are good... Not all S-chips are bad... Not all REITs are the same... Not all business and infrastructure trusts are equal...

It's not the vehicle. It's the driver!

If I can buy a "worthless" penny stock at $0.01 cents and flip it to a greater fool at $0.02 cents, it's a 100% gain! Who's your daddy!?

But if I buy a super duper bluest of blue chip at $10.00, but can't find anyone else to off-load it to.... And the only way out is for me to sell at $9.00, who's the one carrying the baby? Hey! I must be the patsy who bought at the top! *&^%$##%^@!$%^

LOL!

Cityspring has pretty good assets but a terrible capital structure. The Trust is historically loss-making and distributions are being funded by capital (non-cash expenses like depreciation). Moreover, there are no provisions to repay debt since they ain't profitable and bulk of the cash-flow goes to distributions. As a result, it is of little surprise that they have to raise funds three times (IPO, 1st rights issue, 2nd rights issue). Hopefully the new Management would be more conservative and avoid making such high level of distributions. It is the sustainability and regularity of the distribution and not the size of the distribution that separates a well-managed Trust from a poorly-managed one.

KGT is a rare business trust with zero debt and stable operating out-look since counter-parties are linked to AAA-rated SG Govt. But I don't find the yield to be terribly exciting yet. Perhaps at 6% earning yield onwards will be great buy !

Personally, I do find infrastructure assets to be highly attractive especially ports, toll roads etc due to their high moats. Unfortunately, they tend to be coupled by high level of debts which would make refinancing tough in a credit crunch. MIIF investors would appreciate this after the perilous 1H 2009 when Arqiva halted distribution payment to their investors (like MIIF) to repay debt/fund capex. I guess it makes better sense to invest in infrastructure assets with long-term amortizing loan features or those with low level of debts ?

Would appreciate your views

(Not Vested in any infrastructure trust)

Disclaimer: I am not a qualified financial adviser so please take my postings with a big pinch of salt. And kindly point out any error in my thoughts/data.

Nick,

This Li Ka Shing HK listed Cheong Kwong Infrastructure Trust sure is making our Singapore/Temasek/GIC linked infrastructure trusts look like little brother....

Buying up UK utilities and all! I use it as my benchmark to evaluate Singapore listed infrastructure trusts.

You have answered the dilemma we face as "investors"... KGT not debts but we hiam dividend yield low. And those double-digit high yielders we fear the debts too high...

How I wish there are stocks with the D24 pao chiah label like durians! Sure win no lose one! Ha ha!

(08-09-2011, 04:24 PM)Jared Seah Wrote: Nick,

This Li Ka Shing HK listed Cheong Kwong Infrastructure Trust sure is making our Singapore/Temasek/GIC linked infrastructure trusts look like little brother....

Buying up UK utilities and all! I use it as my benchmark to evaluate Singapore listest infrastructure trusts.

You have answered the dilemma we face as "investors"... KGT not debts but we hiam dividend yield low. And those double-digit high yielders we fear the debts too high...

How I wish there are stocks with the D24 pao chiah label like durians! Sure win no lose one! Ha ha!

Buy only when it is cheap ! Biz Trust has limited growth prospect so don't have to worry about share price spiraling away northwards as the EPS races ahead.