Dividend Warrior's FY2023 Portfolio Update - S$40k Record High Annual Dividends!

Equity Portfolio Cost: S$596, 851

Equity Portfolio Market Value: S$767, 106

Equity Portfolio Unrealised Profit: +S$170, 255 (+28.5%)

Portfolio XIRR (FY2023): +11.3% (inclusive of dividends)

Dividends Collected (FY2023): S$40, 139 (+15.6% yoy)

Total Cumulative Dividends (2010 - 2023): S$281, 645

Current Cash & Cash Equivalents (SSB/T-bills): S$37, 000

(*All figures are accurate as of 29 December 2023)

Portfolio Actions in Q4 2023:

• Accumulated more Sheng Siong at S$1.54 and S$1.56
• Accumulated more DBS at S$31.80 and S$32.60

2023 - Weathering The High Inflation Narrative

There is a saying that a bull market climbs a wall of worries. Despite various market worries, the 'Magnificent 7' US tech names kept trudging higher. Throughout a large part of 2023, the US tech positions I held (Microsoft, AMD, Nvidia & Alphabet) ran up alot on the AI hype while my S-REIT positions continued trending down month after month. Since the tech positions form an insignificant 2% of my overall portfolio, my itchy fingers decided to take profits and rotate the funds into accumulating more blue-chip REITs. I believe inflation would eventually normalise and the US Fed would signal a rate pivot. Currently, Apple and Tesla remain in my portfolio. On hindsight, I should have just let my winners run. Luckily, the late year-end rally in REITs kinda justified my rebalancing. Another lesson learnt. So yeah, besides allocating $30k to SSB in October and November, 2023 basically turned out to be a year of relentless accumulation of quality S-REITs and banks.

Nobody Knows Anything! Stop waiting for the stars to align!

At the risk of sounding like a broken record by now, I can't help but repeat myself in saying this. Time in market is better than timing the market. There is always something to worry about. Throughout the entirety of 2023, numerous experts, gurus and even self-proclaimed Masters out there were predicting an imminent recession for the US. Small US banks like Silicon Valley Bank & Signature Bank collapsed in days due to bank runs. The once-mighty Swiss banking giant, Credit Suisse, collapsed over one weekend. Central banks around the world kept hiking rates due to sticky inflation. Armed conflicts raging on in Ukraine and Gaza strip. Thanks to all these terrifying global events, finance Youtubers had a field day creating tonnes of fear-mongering videos with scary clickbait thumbnails, talking about economic armageddon. Why? For the views of course! For some morbid reason, humans love doomsday stories. 

Oh, and the thing about inflation is that it measures the magnitude of increase in prices. After speaking to people around me this year, I found out a lot of them misunderstood ‘inflation’. It is the pace of change in prices. Prices staying high doesn’t mean inflation is high. It’s about year-on-year comparison. The inflation spike and peak is behind us. As a result, this surprise year-end rally caught almost everyone off guard. By sitting out of the market, we risk missing out on the best days. By the time you withdraw capital from fixed income instruments, the market has already run up substantially. So once again, it has been proven that nobody truly knows what will happen to the economy. Not Warren Buffett, not Jerome Powell. A simple plan rigorously executed now is better than a perfect plan executed much later. Some people think if they wait long enough, the stars will align and the perfect buying opportunity will emerge. Timing the market bottom is a fool's game. Don't cling onto perfection. There is no perfect moment to invest. Say goodbye to perfection.

Achieved Record High Annual Dividends and Portfolio Value

In my previous post, I mentioned that I would ignore the 'noises' and ride out the storm as per my modus operandi. Lo and behold! My consistent accumulation of REITs throughout the rate hike cycle has been rewarded. Patience is bitter, but its fruit is sweet. Patience is power. Singapore REITs staged a fierce rally over the Christmas festive period, helping to boost my portfolio XIRR into positive territory. I got to enjoy both capital appreciation as well as dividend income growth. Right now, investors are scrambling to rebalance and reposition their portfolio for the rate cut cycle in 2024. Well, I already planted the seeds back in 2022 and 1H2023.  

If I would to sum up the year 2023 with regards to the investment industry, it is that nobody knows anything. Just stay the course. Resist messing around with a winning formula. Let the compounding effect picks up pace. Once the snowball starts going, it goes! Our portfolio is like a bar of soap. The more we touch it, the less we have. Avoid over-tinkering. Just leave it alone and go live your life, which brings me to my next point.

Creating A Lifetime Of Vacations

The highlight of 2023 has to be my first ever trip to Bangkok, Thailand! Beautiful city, friendly people and tasty local food. Truly the Land of Smiles! A return visit is definitely on the cards in 2024. Also planning a trip to Tokyo, Japan this year. That's the beauty of dividend investing. My overseas trips can be 'sponsored' by my dividend income stream, thus creating a lifetime of vacations. Power of CD! 💪

~ New Year! New Dreams! New Ways! ~

Happy New Year, everyone! 

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Dividend Warrior's 9M2023 Portfolio Update - Ride Through The High Rate Environment!💪

 

Equity Portfolio Cost: S$559, 160

Equity Portfolio Market Value: S$704, 902

Equity Portfolio Unrealised Profit: +S$145, 742 (+26.1%)

Portfolio XIRR (9M 2023): -7.6% (inclusive of dividends)

Dividends Collected (9M 2023): S$33, 201 (+18.7% yoy)

Total Cumulative Dividends (2010 - 9M 2023): S$274, 707

Current Cash & Cash Equivalents (SSB/T-bills): S$43, 000

(*All figures are accurate as of 30 September 2023)

Portfolio Actions in Q3 2023:

• Initiated a position on Sheng Siong at S$1.50
• Accumulated more UOB at S$27.95

How I Prepare To Ride Through The Storm...

1. Diversify Into Recession-Proof, Cash-Rich Sheng Siong

Q3 2023 had been brutal to REITs as the US Fed signalled higher rates for longer to fight inflation. I foresee REITs' dpu to weaken in the coming quarters. Therefore, it is time to further optimise my portfolio for more sustainable passive income. Actually I already started this recalibration a couple of years back. Distributions from REITs were consistently re-invested into the local banks (DBS, UOB & OCBC), Big Tech & Propnex. These are cash-rich companies with strong balance sheets and business moats. Significantly higher dividend payouts from the banks have helped to mitigate the dip in REITs' dpu. Sheng Siong is my latest candidate. Due to the higher for longer rate environment, I would be pulling back on big REIT buys over the next few quarters. My firepower would switch to accumulating Sheng Siong. I am targeting around 5% allocation for Sheng Siong eventually. Due to sticky high inflation, more families are cooking at home. More value for money. Recent government policies tend to gravitate towards helping low to middle income families with the distribution of CDC vouchers. In 2024, each household will receive $150 CDC vouchers for spending at supermarkets. Sheng Siong should benefit from this assistance package.

2. Build A Bond Ladder with SSB & T-bills

Besides diversifying into recession-proof stocks like Sheng Siong, I am also building up a bond ladder. Starting from October, I would allocate some funds to Singapore Savings Bond and T-bills every month. As long as the yields remain attractive, I would continue to park some of my cash warchest in these fixed income instruments. In the event of a recession next year, I would have sufficient firepower to pounce on any opportunities.

3. Just Hold & Collect CD

In the meantime, I am not throwing the baby out with the bathwater. I would still be holding onto my core REIT positions. No knee-jerk reactions from me. Hold on to those that can weather the high interest rate environment until the end of 2024. For now, all my major REIT positions have below 40% gearing and a well spread out debt maturity profile (avoid REITs that have huge refinancing needs coming up in 2024). It also helps to have a strong reputable sponsor. The average entry prices of my REIT positions are low, so I can afford to hold. Secondly, over the last 14 years, I have collected more than S$270k in dividends which serves as a healthy buffer. Some investors prefer to cash out everything now and avoid REITs totally until US Fed start to cut rates. Well, I have learnt to stop waiting for the perfect conditions and all the stars to align. Market timing is futile. Being all-in or all-out is mentally exhausting. 

Lastly, if you guys are worried about an impending recession, just visit VivoCity and Raffles City on the weekends or even weekdays. The crowd level is simply astonishing. Despite the higher prices at restaurants, business seems good. 

"Successful investing is about managing risk, not avoiding it."

~Benjamin Graham~

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Dividend Warrior's 1H 2023 Portfolio Update - Where Is The Recession?

(Total cumulative dividends: S$263, 709)

Portfolio Cost: S$556, 740

Portfolio Market Value: S$713, 536

Portfolio Overall Unrealized Profit: +S$156, 796 (+28.16%)

Portfolio XIRR (1H 2023): -3.7% (inclusive of dividends)

Dividends Collected (1H 2023): S$22, 203 (+35.1% yoy)

Total Cumulative Dividends (2010 - 1H 2023): S$263, 709

Current Cash Warchest: S$21, 470

(*All figures are accurate as of 30 June 2023)

Portfolio Actions in Q2 2023:

• Full divestment of Nvidia at +37.8% gain
• Full divestment of Microsoft at +27.1% gain
• Full divestment of TSMC at +7.6% gain
• Partial small divestment of Propnex at +359.7%
• Accumulated more OCBC at S$12.35
• Accumulated more UOB at S$27.90
• Accumulated more ParkwayLife REIT at S$3.73
• Accumulated more Frasers CentrePoint Trust at S$2.18

A.I. Driven Rally & Bumper Dividends from banks in Q2 

Thanks largely to significantly higher dividend payouts from the three local banks in Q2, total dividends collected in 1H2023 has increased 35.1% yoy compared to 1H2022. The Artificial Intelligence (AI) mania has taken the US markets by storm, pushing big tech stocks to new all-time highs. Yeah, so much for all the talk about a deep recession. Anyone still remember the Silicon Valley Bank & Credit Suisse crisis? Seems like Jerome Powell is going to get his wish of a 'soft landing' for the US economy. I took this opportunity to fully divest my very minor positions in Nvidia, Microsoft and TSMC, which take up 4% of my overall portfolio. I am left with Apple, Tesla, Alibaba and AMD as my current tech holdings. The divestment proceeds were then re-invested in solid banks & REITs as their prices dipped in June. You guys know me. BTFD is my preferred style. Before this latest rebalancing exercise, DBS was my top banking position by far. Now, OCBC is my largest banking position, followed by DBS and UOB. Let's take a closer look at OCBC.

OCBC's Potential For Higher Dividends & Latest Strategic Refresh

OCBC's aim to bring its CET1 ratio towards 14% in the short to medium-term translates into roughly S$4.4b of excess capital. So, the bank can potentially raise its dividend payout in the coming years. If OCBC maintains its current dividend payout ratio of 50%, it is poised to be the highest yielding bank compared to DBS and UOB.

Auntie Helen and her executive team have been busy. OCBC aims to deliver S$3b in total incremental revenue by 2025, through a focused push into ASEAN-Greater China region. More than S$50m will be invested to build up capabilities in the Greater China market. 

• Aims to double the AUM of its Premier Banking and Premier Private Client segments in Greater China. The number of relationship managers serving high net-worth customers will double by 2025.
• Bank of Singapore (OCBC's private banking subsidiary) aims to increase its AUM to US$145b by end-2025.
• Expand its coverage of SMEs in Hong Kong. Aims to onboard 26, 000 new SMEs over the next 3 years. 

As a long-term shareholder of OCBC, I am positive about OCBC's latest strategic focus on private wealth management. An increasing number of family offices have been setting up their operations in Singapore in recent years as Hong Kong lags behind. After the pandemic, I reckon even more ultra high net-worth individuals (UHNWI) are looking to shift their wealth out of China into safe havens such as Singapore. Some say Singapore is becoming the Switzerland of Asia. The huge influx of foreign wealth prompted the government to raise the ABSD tax to cool down the property market in April.

Asia is entering a phase where tremendous family wealth is being transferred from the Boomer generation to the Gen Z and millennials. In Singapore, we call boomers the 'Merdeka Generation'. OCBC can ride on this biggest wave of inter-generational wealth transfer in history. Target the rich. 

Let's face it. Since the middle-class is getting burnt and squeezed dry, the upper elite class is the only place left for businesses to exploit for future growth. Just look at how people are spending on luxury goods and designer brands despite the high inflation. The UNWI simply do not feel the impact of macro economics. As the birth rate drops rapidly in China, more family wealth will eventually end up in fewer hands. In my opinion, the wealth gap will probably become even wider in the coming decades as Gen Z and millennials start to receive their inheritance and take over the reins of their family businesses.

Get Wealthy in Stealth & Spend On Long-term Value

As I get older, I start to appreciate the value of stealth wealth. Don't be flashy. Don't flaunt. Spend within my means. My spending philosophy is to go for long-term value. Just because you can afford something expensive doesn't mean you have to buy it. You need to evaluate if that Chanel, Gucci, Prada, LV or Hermes handbag actually add long-term value to your life or is it going to collect dust on the shelf. If I use something on a regular basis, I am willing to pay more for better quality. Example, a comfy pair of sneakers, firm bed mattress, premium laptop, quality food etc. My two cents worth on personal budgeting. Never spend everything like it is your last day on Earth. Don’t save everything and forget to live. Balance is key! 

Be Silently Rich

Dividend Warrior

Follow me on Twitter at https://twitter.com/DivyWarrior