Monthly Archives: May 2011

Generating Income with High Dividend Paying Shares – May Update

Edited on June 03 to add a Starhub dividend payment I missed.

It’s over three months since my last post on the shares that I was looking to purchase to generate income through high dividend payments. Therefore, I thought it was about time to provide an update on my portfolio’s performance.

I have created a table to keep track of my stock purchases including the dividends paid and the profit/loss thus far.

Stock Date Purchased Purchase Price
Market Price Profit/Loss
SPH 16/02/11 $3.98 $3.86 -3.02%
Singtel 22/02/11 $2.92 $3.21 9.86%
Singtel 18/03/11 $2.87 $3.21 11.77%
SP Ausnet 16/02/11 $1.14 $1.20 5.45%
Starhub 16/02/11 $2.62 $2.79 6.57%
SingPost 16/02/11 $1.17 $1.14 -2.48%
Stock Dividend Total Profit/Loss (Capital+Dividend)
SPH $0.07 -1.26%
Singtel $0.19 16.36%
Singtel $0.19 18.38%
SP Ausnet $0.052 10.02%
Starhub $0.10 10.39%
SingPost $0.025 -0.34%

Looking at the numbers thus far, I have made a 5% profit on the capital (including purchasing costs), which increases to an 9.1% profit when including announced dividends. Given most of the purchases were in the middle of February that equates to more than 15% p/a and 27.5% p/a respectively. This is better than what I had expected, although it was helped by some companies paying special dividends on top of their normal payouts.

However, I’m now getting a bit nervous about the overall world economy for a few reasons:

  1. Growing Euro Zone debt problems.
  2. USA debt ceiling negotiation problems.
  3. End of Quantitative Easing II (QEII) in June.
  4. Signs of growing inflation and slowing global economic growth.

Any one of the above could cause a pull back on the markets and any combination would probably cause major drops. Therefore, I’m very tempted to get out of the market with the gains that I have already made.

Unfortunately I can’t just sell all the shares to take the stated profit and run. As I mentioned above the calculations include announced dividends, not paid dividends. Some companies are quite tardy in their payments (Singtel hasn’t even announced payment dates!), while others are relatively quick to payout (SPH).

SPH paid its dividend on May 24, 2011, while Starhub is next in line to pay on June 02, 2011. Unfortunately SPH’s share price has gone down since I purchased it, but I’m happy to hold on to the stock for the moment. Starhub is looking quite attractive at $2.79, to take both the dividend and capital gain, for roughly an 9% profit after costs. I’m also tempted to sell my Singtel shares at $3.21, but I really want that nice dividend, so I’ll wait for the payment dates to be announced before making a final decision.

SP Ausnet is a special case with the dividend payment due at the end of June, right when I expect the end of QEII to be making people have a serious think about their market exposure. If things do go pear shaped then the Aussie dollar would likely pull back against the Singapore dollar. This would decrease the value of both the share price and dividend of SP Ausnet, so depending how things go I may have to just take the capital gain and forget about the dividend. I can always buy the stock on the Aussie share market if the Aussie dollar dives and then make some gain on the currency once it recovers too.

I did know that the problems I listed above were likely to bite in the middle of this year, so I was quite prepared to get out of the share market around this time. Therefore, I feel like I’m becoming a bit of a short term investor, rather than a long term buy-and-hold investor. This has made me wonder if many people have much luck with a hit and run investment approach on high dividend paying stocks. That is, an investor purchases the share before the price build up in anticipation of the dividend payout and then sells again once the stock recovers from its expected post dividend drop. This would limit an investor’s exposure to major shocks, while still maintaining the income stream. There are the higher buying and selling costs to consider if using this method. I’d be interested to know if anyone has tried this? Feel free to drop a comment below!

Disclaimer: The above is my own opinion and not financial advice.



Singapore General Election 2011 – Aftermath

I’m not Singaporean, but I felt I was more excited about the recent election than many of my Singaporean friends. The result was never in doubt in my mind, PAP would win, leaving it to be a question of whether the opposition parties managed to get more than the one GRC the Workers Party (WP) was targeting. After all the votes were counted only the Aljunied GRC was won by the opposition, resulting in six WP representatives entering the parliament.

While many enthusiastic supporters of the opposition were looking for a huge success against the incumbent PAP, the majority (~60%) of Singaporeans still feel the PAP is the party to lead them into the future. Although I’m sure that many Singaporeans who did vote for the PAP also hoped that the opposition would win the Aljunied GRC.

This strange reasoning of voting for the PAP, but hoping for the opposition to win some seats is because many Singaporeans will tell you that this election was about sending a message of dissatisfaction about current PAP policies, an increasing level of arrogance and a disconnection from the lives of average Singaporeans. They wanted opposition members to win some seats to make sure that their voice was heard at the ballot box and during the next 5 years in parliament.

However, from an outsider’s perspective I feel that this election was about far more than that. This was an election about the awakening of Singaporeans to decide what type of Singapore they want for themselves and more importantly their children or grandchildren. It was a vote for a more transparent and open government, one that listens to its citizens and cares more for them, an end to dirty political tricks and a more balanced media. Essentially a freer, more open and democratic society that is inclusive of all citizens rather than being dominated by the elite few.

Apart from the obvious anger about the PAP’s performance this change was largely brought about with the engagement of the internet generation through the use of Youtube videos, Facebook, alternative news sites and personal blogs. This has turned many an apathetic Singaporean into a politically aware individual. I saw my Facebook news feed flooded with different points of view, mostly in favour of the opposition. There were also some amazing comments from people who were having a “hallelujah” moment as the censorship machine was thwarted by the internet and my friends finally saw the bias of the government controlled media. I personally can’t read the Straits Times because I find that I want to start yelling at the reporters for not doing their jobs!

The PAP now knows that Singaporeans will vote against them in large numbers, especially the internet generation, of which there will be many more at the next election. Whereas most SMCs and GRCs had a large majority in the past, requiring a massive swing to the opposition to ever be in doubt, quite a few seats would be in the opposition’s hands with less than a 10% swing in the next election.

What happens over the next 5 years will ultimately determine the pace of change in Singapore in the near future. I see a few scenarios:

  1. Lee Kuan Yew passes away and the PAP suffers a power struggle resulting in a split into two parties, creating the strongest opposition party in Singapore and possibly an immediate election.
  2. The PAP listens to the message that Singaporeans sent during the last general election and adopts appropriate policies to placate the anger. This will make it much harder for the opposition to make inroads in 2016, irrespective of their performance in Aljunied. Singaporeans do not like to rock the boat!
  3. The WP manages the Aljunied GRC effectively and gains respect of not only the local residents, but other Singaporeans who see that an opposition party can run a GRC well, giving them confidence to vote for the opposition. The opposition members of parliament perform well, attacking poor policies and providing the voice in parliament that Singaporeans want. The WP also manages to attract star talent and creates strong grassroots programs to build awareness and support across Singapore. Meanwhile the PAP does not address the concerns raised in 2011 and Singaporeans are even angrier in 2016. This results in a huge change in the parliament with a loss of the majority needed to pass legislation freely, or even a loss of power for the PAP.

Many people outside of Singapore would consider an election result that gave 81 of the 87 available seats to the incumbent party a huge defeat to the opposition. However, I believe that the 2011 general election will be remembered by many as the turning point in Singaporean politics, where the foundation of a strong opposition movement was laid. Thus defining a move towards a freer and more open society, together with the building of a modern Singaporean identity!