Phillip Singapore Real Estate Income Fund – What price to enter?

In my last blog post: “Surprise in Reits ETFs Review!“, I mentioned that I would just buy Phillip Singapore Real Estate Income Fund (PUT) instead of buying individual REITs on local market when the share price of SG Reits (i.e also implied for PUT) decline to an attractive level.

Following that, I have received questions of “what is that attractive price before I start buying PUT again”?

Well, a politically correct answer is to buy it at a level that is comfortable to you and to stay invested all the time. However, I am sure you are not looking to me to provide such an answer 🙂

I have done some analysis and determine my entry point. I will share my thoughts with you as follows.

Philip Singapore Real Estate Income Fund has been paying dividends on a quarterly basis regularly. This statement is derived from its website that showed that it has been doing so at least for the last 5 years already. That is a great track record by itself .

investment2_19

What is also impressive is that the dividend per unit has been increasing from Mar 2012 of 1.5 cents per quarter to the last one (June 2017) of 1.63 cents per quarter. There is not a single decline between quarters in those 5 years.

Below is a table showing the unit price of PUT, the DPU declared per quarter and the “annualised” yield: (I am starting from 2014 omwards as I only have their unit price from that point onwards)

DPU/Qtr (cents) Price/Unit (cents) Div Yield %
7-Oct-14 1.58 128.2 4.93%
31-Dec-14 1.58 130.5 4.84%
31-Mar-15 1.61 132.9 4.85%
30-Jun-15 1.61 128.6 5.01%
30-Sep-15 1.61 121.6 5.30%
31-Dec-15 1.61 119.3 5.40%
31-Mar-16 1.61 121.8 5.29%
30-Jun-16 1.61 121.4 5.30%
30-Sep-16 1.61 128.2 5.02%
30-Dec-16 1.61 123.1 5.23%
30-Mar-17 1.61 124.3 5.18%
30-Jun-17 1.63 128.8 5.06%

You will notice that the dividend yield is fairly consistent. It ranges from 4.84% to 5.40%.

If we do a statistical analysis on the dividend yield, the mean is 5.12%. The 25th percentile is 4.99% and 75th percentile is 5.29%.

As you may have noticed, while the unit price moved up and down with the market, dividend per quarter has been constant or imcreasing. Hence I am fairly certain that the fund managers must have made their proper assessment before raising the dividend per unit to a new high of 1.63 cents in the last quarter. It should stay.

If we assume the same 1.63 cents quarterly dividend, and based on current price of 135.5 cents per unit, the dividend yield is only 4.81%, that is even lower than the lowest in the last 5 years :-(.

Hence, I don’t think it is the best time to buy now.

decision-making-clipart-the-way-to-make-r7ZZbf-clipart

In my opinion, I would start accumulating from the point of 50th percentile (5.12%) and progressively accumulate more (probably via a monthly investment scheme to be more disciplined) if the unit share goes down further, ie. dividend yield increases. 

However, if the unit share starts to increase, i.e dividend yield drops, I would stop the scheme when the yield reaches 25th percentile (4.99%) or below. 😂 just nice it is 5%, similarly my desired yield for my investment portfolio.

So, based on 1.63 cents quarterly dividend, to get at least 5.12% yield, the price of each unit has to be 127.3 cents or below. So, I will start accumulating when it falls back to this price.

And if it starts increasing after that, I will stop accumulating when the yield is 4.99% or below and unit share is 130.6 cents or higher.

Well, I know the 127.3 cents is a far cry from the current price of 135.5 cents, however, like they say, the more patience the investor has, the more likely he/she will make money.

However, if you are comfortable with a yield of 4.81%, which is actually quite decent, then the current unit price will work for you too.

To each his/her own ….

Have a great investment week ahead.

Warriortan

smallcap

Advertisements

2 thoughts on “Phillip Singapore Real Estate Income Fund – What price to enter?

  1. Please get your facts right. Dividends/distribution in unit trust id meaningless as it’s exit left pocket, enter right pocket.

    Eg.
    They give you 5% dividend/distribution, the NAV will drop by 5% also.

    While a dividend from stock is from actual cash that the company have.

    When a company give dividend, the price can increase, maintain or decrease.

    But the point is dividend from company is real. Dividend from UT is not real.

    Like

    1. Hi Regular Joe, I don’t disagree with you. In this case, the UT obtains the dividends from the companies it invests and distributes it. The UT manager has discretion on how much he/she wants to distribute. And how what I have seen so far, they are distributing ~ 5%. Yes if they do not distribute those dividends they receive, the NAV will increase assuming everything else is constant. But NAV is much more than the dividends as it is the total market value of the companies it invest in and the cash they hold on hand. It’s pretty similar to a company. If a company decides not to distribute dividends, its Net Asset will go up and generally the value of the company will go up too assuming everything else constant. Perhaps for me to learn from you … can you share where is the fundamental error?

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s