Phillip SGX APAC Dividend Leaders REIT ETF

[Temperament]

The term "Dividend Leaders" is a misnomer considering this ETF is 100% REIT driven. Distributions are not dividends and in current low interest rate environment, it is simply not possible for a broad based index focused in AU, HK and SG to generate 5.19% "dividend yield".

Asset managers have deliberately conflated the two distinctive financial terms in their self-promotion. This is a potential major hazard down the road as I understand a lot of retired senior citizens are living on such "dividends" under the wrong impression that they are safe and sustainable.

Care to explain to me why distributions are not the same as dividends? 
Why do you say that these dividends are not safe & sustainable?

To answer your question, one would need to look into each and every REIT on their "capital structure" (gearing, type of loans etc). A dividend is defined as a distribution out of excess earned profits, rather than out of capital. So even though some of the leasehold type of Trusts disguise their "return of capital" as profits, it should still be considered dividends, based on the definition.

"Safe" is a really relative term. So unless we have a reference point for "safe", then there is no point to start a discussion here, since all of us have different notions for it.

I reckon a lot of retired senior citizens were once regular salary-receiving employees. This explains why they would continue to seek "regular dividends" from their investments, when it should be very clear to them, that along the way as they aged, they should have observed that the really rich people are the ones who focus capital gains over dividend payouts. For those retired senior citizens whom have held the big caps/blue chips (low dividend yield when they purchased it donkey years ago, but has a higher probability to keep growing with GDP), kudos to them. I do suspect that those who piled a large portion into REITs (and depend on its predictability/high yield) are not going to end up as per intention.

Thanks for your explanation. 
For those retirees who are dependent on a big Reit portfolio for their retirement, what would you suggest? Keep a  cash warchest by the bedside for right issues?

Of course.
Not that non-reit companies don't have right issues, we all know Reits have almost zero retained earnings, so be very prepared for right issues.
Otherwise expect to get diluted but most probably you can sell away your rights as Nil Paid Rights as a compensation.

[Temperament]

The term "Dividend Leaders" is a misnomer considering this ETF is 100% REIT driven. Distributions are not dividends and in current low interest rate environment, it is simply not possible for a broad based index focused in AU, HK and SG to generate 5.19% "dividend yield".

Asset managers have deliberately conflated the two distinctive financial terms in their self-promotion. This is a potential major hazard down the road as I understand a lot of retired senior citizens are living on such "dividends" under the wrong impression that they are safe and sustainable.

Care to explain to me why distributions are not the same as dividends? 
Why do you say that these dividends are not safe & sustainable?

To answer your question, one would need to look into each and every REIT on their "capital structure" (gearing, type of loans etc). A dividend is defined as a distribution out of excess earned profits, rather than out of capital. So even though some of the leasehold type of Trusts disguise their "return of capital" as profits, it should still be considered dividends, based on the definition.

"Safe" is a really relative term. So unless we have a reference point for "safe", then there is no point to start a discussion here, since all of us have different notions for it.

I reckon a lot of retired senior citizens were once regular salary-receiving employees. This explains why they would continue to seek "regular dividends" from their investments, when it should be very clear to them, that along the way as they aged, they should have observed that the really rich people are the ones who focus capital gains over dividend payouts. For those retired senior citizens whom have held the big caps/blue chips (low dividend yield when they purchased it donkey years ago, but has a higher probability to keep growing with GDP), kudos to them. I do suspect that those who piled a large portion into REITs (and depend on its predictability/high yield) are not going to end up as per intention.

Thanks for your explanation. 
For those retirees who are dependent on a big Reit portfolio for their retirement, what would you suggest? Keep a  cash warchest by the bedside for right issues?

Of course.
Not that non-reit companies don't have right issues, we all know Reits have almost zero retained earnings, so be very prepared for right issues.
Otherwise expect to get diluted but most probably you can sell away your rights as Nil Paid Rights as a compensation.

And sometimes right issues is really a blessings especially during a market crash.
Because usually it will be quite attractively priced as you can smell fear in the air is high at that time.
It is definitely a time of higher risks.

[specuvestor]

Hi Temperament so long no see

Actually REITS is roughly doing the Graham model of not retaining profits but raise money only as and when needed. It's interesting for me to observe whether it works in reality

And yes we basically pay REITS manager to do the crap job of collecting rent, maintenance, pay tax etc. But the caveat is that REITS usually are packaged with a lemon or 2... one of the incentives for the owner to sell in a package. Trick is to make sure it is not too sour

And yes I think REITS should have a amortising loan structure rather than a straight bond model. That only make sense to match the Asset/ Liability and not inflate payout.

Are REITS therefore good for all season? I think maybe just adopt Retired@52 mentality as an alternative option to real estate

[Temperament]

Hi Temperament so long no see

Actually REITS is roughly doing the Graham model of not retaining profits but raise money only as and when needed. It's interesting for me to observe whether it works in reality

And yes we basically pay REITS manager to do the crap job of collecting rent, maintenance, pay tax etc. But the caveat is that REITS usually are packaged with a lemon or 2... one of the incentives for the owner to sell in a package. Trick is to make sure it is not too sour

And yes I think REITS should have a amortising loan structure rather than a straight bond model. That only make sense to match the Asset/ Liability and not inflate payout.

Are REITS therefore good for all season? I think maybe just adopt Retired@52 mentality as an alternative option to real estate

i tend to agree with Retired@52.
When you have a rental property and some REITs, most probably you will agree with him too.
Nothing compare to practicals.

[weijian]

Thanks for your explanation. 
For those retirees who are dependent on a big Reit portfolio for their retirement, what would you suggest? Keep a  cash warchest by the bedside for right issues?

Of course.
Not that non-reit companies don't have right issues, we all know Reits have almost zero retained earnings, so be very prepared for right issues.
Otherwise expect to get diluted but most probably you can sell away your rights as Nil Paid Rights as a compensation.

And sometimes right issues is really a blessings especially during a market crash.
Because usually it will be quite attractively priced as you can smell fear in the air is high at that time.
It is definitely a time of higher risks.

Hi Temperament,
Thanks for answering it from me, from a REAL person, REAL experience.

Hi MINX,
There you have it. 2 REAL person (temperament, retired@52) giving their feedback based on their REAL experience. Any of us can preach about sex whole day long as a monk, nothing beats the young dad who already fathered 5 kids. This comparison is analogous with what we are seeing with financial advisors, financial bloggers and economic professors.

I still remember how a large portion of people got baited on the "double dividend promise" by Rickmers Maritime Trust when they did a rights issue. Kudos to some of these financial engineering folks, they have practised their craft well in behavioral economics. I like to think that as long as we maintain a structure where we are not enslaved (financially, mentally) to the distributions, the OPMI (read: we) should be able to navigate whatever is been thrown at us relatively well.

[Boon]

 
This is interesting…………………………
 
Is “dividend” and “distribution” interchangeable?
 
Is “dividend” in “dividend yield” interchangeable with  “distribution” in “distribution yield”?
 
What is a 'distribution yield' ?
http://www.investopedia.com/terms/d/dist...-yield.asp
_____________________________________________________________________________________________________________________________________


High Rates? Are You Delirious?
By JASON ZWEIG
Updated July 14, 2012 12:01 a.m. ET
http://www.wsj.com/articles/SB1000142405...3204389036
________________________________________________________________________________________________________________________________________________________

[brattzz]

waos! solid information, very real and very practical!

thanks VBs for this good thread!

[brattzz]

"The magical payout machine at Cornerstone works roughly like this: Say you have $1,000 invested. You buy into the rights offering, shelling out another $250 or so to get extra shares. Cornerstone then pays out 20% or more in distributions, causing the value of each share to shrink accordingly.

The end result: You own more shares of a fund that is worth less, and most of the income you "earned" came from the money you put in yourself.

Cornerstone's prospectuses disclose that much of its payouts "will not represent yield or investment return on the fund's portfolio.""

Still, Mike Taggart, an analyst at Morningstar, says he has received many emails from Cornerstone investors who believe that they are earning 20% yields and don't understand that these funds are simply giving them their own money back.

"People see the 'yields' on these funds and they jump in," he says, "and it makes me sick."

But while you could buy the Eaton Vance fund this week at a 14.3% discount to its net asset value, meaning that each $100 of its investments cost you less than $86, Cornerstone traded at a 10.3% premium. That means you had to pay $110 to get $100 in underlying assets.

Investing has sunk to this: People are willing to pay a big premium for the privilege of getting their own money back, after fat fees, without interest—apparently because it gives them the illusion of earning a high yield.

sounds ponzi leh and paying the ponzi managers.... :O

[Temperament]

Ha! Ha!
There you can see again.
Nothing beats primary to secondary maths.

Qs:-
That's how much money you put in?
How much money you got out?
How much money left in?

Future earnings?
Who cares if the present you are losing money already.
That's me, so simple minded one.

Simple primary to secondary maths will help me.
Anything more than this, consult Google, Yahoo, Investopedia or anywhere or anybody willing to help lol!
Still can't understand, i am not smart enough ( read stupid), don't invest lol.
QED.

[Temperament]

"The magical payout machine at Cornerstone works roughly like this: Say you have $1,000 invested. You buy into the rights offering, shelling out another $250 or so to get extra shares. Cornerstone then pays out 20% or more in distributions, causing the value of each share to shrink accordingly.

The end result: You own more shares of a fund that is worth less, and most of the income you "earned" came from the money you put in yourself.

Cornerstone's prospectuses disclose that much of its payouts "will not represent yield or investment return on the fund's portfolio.""

Still, Mike Taggart, an analyst at Morningstar, says he has received many emails from Cornerstone investors who believe that they are earning 20% yields and don't understand that these funds are simply giving them their own money back.

"People see the 'yields' on these funds and they jump in," he says, "and it makes me sick."

But while you could buy the Eaton Vance fund this week at a 14.3% discount to its net asset value, meaning that each $100 of its investments cost you less than $86, Cornerstone traded at a 10.3% premium. That means you had to pay $110 to get $100 in underlying assets.

Investing has sunk to this: People are willing to pay a big premium for the privilege of getting their own money back, after fat fees, without interest—apparently because it gives them the illusion of earning a high yield.

sounds ponzi leh and paying the ponzi managers.... :O

And i think, SGX also has some companies operating in a similar fashion.