Time flies and we are in the last month of the year 2017. I am not expecting anymore companies in my stock portfolio announcing dividend payout. This year, the total dividends I have collected is S$7,350.31. This was a 27.5% decrease in dividend collected as compared to the year 2016 where I reap a total of S$10,132.04 in dividends. The reason for the decline was a lack of special dividends payout in some stocks I held and also declining distribution per unit (“DPU”) for the REITs I am holding.
From the declining DPU of some REITs, the lesson I learnt is high distribution yield may be attractive but it must also be sustainable. For example, SoilBuild Business REIT is having distribution yield of 8% to 9% but fundamentally, it is not sustainable. When its tenants default, the DPU declines quarter on quarter. On the other hand, CapitaMall Trust is giving a dividend yield of estimate 5.5% which is considerably not so fantastic but it is resilient and provides stable distribution payout quarter on quarter.
As the economy gets tougher, businesses are not able to pay out special dividends but it is important that they are able to maintain their normal dividend payout. One thing I learnt is to look at the dividend payout ratio rather than the dividend yield. If the company has a dividend payout ratio policy of 50%, if earning increases, it means it will pay out more.
This year, I have sold off pretty many stocks.
I bought some what I believe has deep value, quality companies either into my stock portfolio or to my spouse stock portfolio.
With only 25% cash on hand right now, it will take a few months ahead to replenish my war chest. In the meantime, I shall continue to collect my dividends in 2018. Given the market has grown to be pretty expensive, under valued dividend paying companies are very hard to spot now.