Dividend Warrior 9M2024 Portfolio Update - SREITs Rally! New All-Time High In Portfolio Value!

Equity Portfolio Cost: S$611, 230

Equity Portfolio Market Value: S$784, 522

Equity Portfolio Unrealised Profit: +S$173, 292 (+28.3%)

Portfolio XIRR (9M2024): +4.1% (inclusive of dividends)

Dividends Collected (9M2024): S$34, 628 (+4.3% yoy)

Total Cumulative Dividends (2010 - 9M2024): S$316, 273

Current Cash & Cash Equivalents (SSB/T-bills): S$42, 000

(*All figures are accurate as of 30 Sep 2024)

Portfolio Actions in 3Q 2024:

• Accumulated Sheng Siong at S$1.51
• Accumulated Alphabet at US$163
• Accumulated Nvidia at US$113
• Accumulated Microsoft at US$410
• Subscribed to CICT preferential offering with small amount of excess units

My Barbell Approach Continues - 'Sheng Siong + Tech'

The US Federal Reserve finally began the rate cut cycle in September, seeking to normalise interest rates again as inflation trends closer to their 2% target and the US labour market softens. This pivot sent S-REITs sector into an incredible 7-week rally. My REITs-heavy portfolio shot back up to an all-time-high market value of S$784.5k! My total annual dividend income is on track to hit a record-high of S$42k this year, which translates to S$3.5k per month. 

Rate cuts provide a tailwind for REITs in three ways. First, as the risk-free rate trends down, the yield spread against REITs would widen. Investors chasing better yields would pile back into REITs, causing prices to rise. For example, if Singapore T-bills yield around 2% next year, then a 5% yield from a blue-chip REIT starts to look attractive. Second, lower interest rates would translate to higher NAV and healthier gearing levels for REITs. Third, DPU could increase as the REITs refinance at lower rates. However, we would only see the effects many quarters later. Honestly, after the relentless rally in September, I think most of the positive sentiments on REITs have been priced in for now. 

Surprisingly, the three local banks are still holding up well despite analysts and experts touting that rate cuts are bad for banks. In fact, if we take DBS recent 1-for-10 bonus share issue into consideration, its price is actually more like above S$40. Imagine trading in and out of the market, trying to time the dips and rallies perfectly. I would have missed out on this sudden S-REITs recovery. As a long-term investor, time in the market is better than timing the market. We never know when Mr Market might just make a U-Turn into 'euphoria' mode. By the time we gathered our wits and saw the news on mainstream media, it's probably too late to act. 

As for OCBC, its dividend visibility could be boosted if it can gain full ownership of Great Eastern. There is potential for excess capital from Great Eastern to be returned to OCBC shareholders if 100% ownership is successful. Furthermore, compared to DBS and UOB, OCBC has a larger exposure to the Greater Bay Area in China. It stands to benefit from the latest stimulus packages from the Chinese government.  

As I have mentioned in my previous portfolio updates, I have stopped accumulating REITs and banks in meaningful amounts since the beginning of 2024. Currently, I am holding more than enough REITs. I am comfortable with the 67% REITs allocation in my portfolio. With the recent run-up in prices, all the more reason I am in no rush to accumulate. More prudent to just sit back, enjoy the rally, collect the dividends and build up some dry powder. The same approach applies to my bank positions. They are at a comfortable 24% allocation level with juicy stable dividends. No compelling reason to accumulate at current lofty valuations. Just hang on tight and surf the wave. Sometimes, doing nothing is the best. 

With my core positions remaining intact, most of my buys in Q3 went into US tech companies. My ultimate goal is to hit 10% allocation for 5 tech companies in my portfolio within the next 5 years. These tech positions serve as an avenue for me to reinvest dividends from my income stocks. Even though Nvidia's recent earnings beat market expectations, investors thought the company's forward guidance was not spectacular enough, causing the price to dip sharply in August. I think Nvidia is a victim of its own success, setting the bar too high. The market is more likely to expect crazy growth numbers every quarter. But I am confident of its long-term growth trajectory in the AI sector.  Alphabet is embroiled in legal tussle with the US Justice Department. Google is accused of being a monopoly (again!). This is just the usual noise. There is just no realistic alternative to Google Search and Youtube. Took this opportunity to buy the dip. There was a period in August when the market was suddenly fearful of the AI bubble burst, sending Microsoft share price lower. You could say Microsoft suffered some 'collateral damage' post Nvidia earnings. Of course, I added Microsoft during that short period of market fear. Within a week or two, these positions recovered. This shows that we need to have a plan ready and be decisive when the opportunities present themselves, especially in the US market.  

(Source: The Straits Times)

(Sheng Siong 5-year dividend track record)

To balance out the volatility of my tech positions, I have been accumulating Sheng Siong shares every quarter since last year. This grocery retail company is a cash-generating machine with a strong balance sheet and sustainable dividend payout. Strong cash-flow and zero debt. This company is like the Costco or Walmart of Singapore. With more rate cuts expected in 2025, Sheng Siong's dividend yield of around 4.2% at $1.50 is starting to look pretty decent. Unlike Banks and REITs, Sheng Siong's earnings is not subjected to interest rate sensitivity. 

A secondary reason is that the government has been implementing support measures to help local residents cope with the rising costs of living in Singapore. Although core inflation has slowed down significantly this year, prices remain high. People tend to misunderstand this concept. Slower inflation just means prices are increasing slower, not going lower. In my opinion, the CDC vouchers would probably continue. In fact, each household will receive $300 in January 2025. These vouchers can be spent at supermarkets such as Sheng Siong, thus potentially benefiting the company. Such direct handouts from the government would be difficult to remove as it has proven popular especially among the low-income families and retired elderly. With the costs of eating out rising, more families could choose to cook meals at home more frequently, which also benefits Sheng Siong since most of its stores offer affordable fresh produce too. 

Lastly, as we already witnessed during the Covid-19 pandemic, supermarkets' earnings spiked as people were stuck at home during the lockdown period and social-distancing was mandatory. Sheng Siong is practically a pandemic-proof stock. I don't know about you guys, but I assume there is a decent chance of another pandemic in my lifetime. Prudent to be prepared.

BTO Renovation Completed!

Six months after collecting the keys to my HDB BTO flat, renovation works and furnishing is finally completed! I officially moved in last month. Loving that fresh, sweet smell of a new home (with 99-year lease). I went for a modern, minimalist and practical style. 

Oh, and Q3 HDB resale prices increased 2.5% QoQ. I have heard plenty of complaints and rants about expensive public housing in Singapore. Let's face it. Property has become just another asset that generates profits and income. It's happening everywhere in developed major cities like Hong Kong, Tokyo, London and New York. Housing is no longer considered a basic human need. Sad, really. But that's the way the capitalistic system is built. No turning back. This system requires a constant stream of home-buyers taking on mortgages from banks. The higher the property prices, the larger the mortgages, the more profits the banks make (more dividends for me >_<). I am just thankful that my flat is fully-paid with my CPF savings. Also glad that I am vested in banks and PropNex. Don't fight the system. Make the most out of it. Find ways to extract benefits from it.

Alright then, time to plan and get ready for my trip to Tokyo in November! ^^