Monday, February 29, 2016

Sustainability of dividends- Investment mistakes

Some are common sense mistakes, but here goes.

1) Not taking into account minority's interest. HPHT has Yantian that is not wholly owned. I did not discount that in my cash flow calculation.

2) Blind by occupancy rate. Sabana used to have all its tenant in triple or master leases. Hence, it's occupancy rate is 100%. It's tenants no. increased so I assumed occupancy rate will hold even when it become multi-tenanted. I was wrong. AReit has many multi-tenant leases too, it is not a problem per se, but it highlight the risk when such 100% occupancy leases are up for renewal. You won't know if there is a nasty surprise coming your way especially if that building form a significant part of revenue.

3) Underestimating the impact of currency. When vested in LMIR, I simply look at the footnote of the AR and conclude the impact of devaluation of rupiah can be offset by growth. 

The devaluation of rupiah hit not only loans to be repayed in sing dollars but also dividends to be paid in Sing dollars. Operation revenue all took a hit too. 

4) Not following the market cycle rule. I looked at Oand G sector, including the charter rate and utilitisation of rigs and conclude that we are nearer at the peak than bottom. But when sembcorp Singapore utilities business fall and resulted in a sharp drop in share price, I started my first shot. I fell into the trap of anchor effect of recent share price.

5) Rights and placement are all bad? It is not true. Almost all reits do fund raising in one way or another. But the discount when it happens and the deal the raised fund fianced is important. Reputation once stinks stick with the company. Look at LMIR, after Alvin Cheng takes over, the acquisition is yield accretive, yet share price continue to be sluggish even when dividends grow and rupiah stabilizes. I would have bought more, but given there is another acquisition coming, I will wait for it to announce a rights/placement and for the market to over-react before I add more. 

6) Buying for a short term spike in dividends. I knew Lee metal will give a bumper crop of dividends in 2014 due to Austville profits recognition. Subtract that away, my yield is still close to 6%, which is what I am comfortable with. But I should be trading rather than holding. When that dividends materialize it share price did improve for a short while. And now the subsequently fall is rather dramatic although 2 cents dividends is still maintained. But including dividends, I just break even or win lose a bit? Didn't really count. (SMOL, can laugh ... I buy to make money not break even LoL) 

What lemons you had?


  1. Sillyinvestor,

    I don't laugh at people.

    I only poke the worthy ones ;)

    Just like when I find someone dozing on the wheel, I'll give a nudge, wake up!

    Now you had your own reflections and know what to do with dividends investing the next time round ;)

    It's not that complicated; but its definitely not "buy term invest the rest" easy ;)

    You said -15% loss no feeling. Once you get -50% loss you'll have the same reflections and sharing like you are doing now - provided you have not capitulated.

    Some, once capitulated, will forever swore off investing in equities. It's too painful.

    1. Seriously hor,SMoL, no need to say political correct words with you
      I think market has to tank 70% before my portfolio go 50% I "SL" right lol

      Also, I Think I will see market at 70% as a opportunity than a threat.
      Of course, what I think I will feel and how I actually feel when it actually happen Can be different.

      But given I no feeling when it's down 15% I dun think I will capitulate when it is down 50% maybe I will feel pain

      If market stay range bound, my cash will slowly increase, if it fire back up, my cash will increase even faster.

      If market goes south fast and furious, I suck thumb

      My "laugh" and your poke hardly different, I know there is no malice and with good intention

  2. Win lose x N times. Soon we will be immune. :-)

  3. Hi SI,

    better to make mistakes now when it's only small teddy bear hug before the big fierce bear bites!

    After N times, u will win more than lose!

    1. Hello Rolf and CW,

      I do think I over-Invest. But I think How many 10 years cycle I have? Furthermore my base is small to start with.

      I do want a larger Emergency fund given I will be approaching mid life crisis soon. Maybe now in terms of job stability but... U know la...

  4. Teacher's job not safe. Whose job is safe? :-)

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