Converting to a Dividend Portfolio - A smart or denial move?

I started converting bulk of my capital into Dividend yield play as part of honing my horizon for a longer term. Basically I bought 3 counters; SingTel, Suntec REIT & NetLink NBN Trust using 80% of my trade capital.

Switching strategy requires a change in mindset, had I remain in trading mode I would have struggled and bite the pain to exit stop loss for counters for all 3 of them, which may have been a good move as I would then limit my loss to about 2% per counter but that would also hit my maximum stop loss of 6% for the entire portfolio and requires me to stop trading for 1 month to review my strategy.

However, since I declared I am switching to dividend longer term play, I had to look pass the short term capital loss (unrealized) and focus on the "cashflow" or the dividend that's expected and build up passive income in my new dividend strategy.

Below I am going to delve into what went on in my mind when I purchased the 3 counters.

Suntec REIT's trading notes
Fundamentals as of 25 April 18's report:
DPU 10c or 5.6% at $1.785; distributions quarterly in May, Aug, Nov, Jan.
PE: 21.9x Price/Book: 0.854
DPU: 1Q18 2.433c, 1Q17 2.425c
EPU: 1Q18 1.7c, 1Q17 1.8c
NAV: $2.119
All-in financing cost 2.73%, debt to asset ratio 35.2%


Holding 37K @ avg.cost $1.74, long term DPU play

My initial entry for Suntec REIT on 28 May 2018 at $1.785 was based on a daily bullish divergence which did worked out initially when it moved to $1.82 touching 26day EMA before it resumed its downtrend. I should have exited either 10 or 11 June 18 which would limit loss to $1.74 (low of the days) but I had to ditch my former trading mindset & adjust to a new cashflow dividend focus.

Later, I entered with another 20K purchase on 21 June 18 after indicator MACD-histogram turned green, but the day I entered it fell somemore briefly turned to red then back to green. Honestly with the Fed's rate increase expected for next 2 years, the current distributions may be reduced and current yield of 5.6% or so may be reduced to 3-4% by 2020. But before 2020, there should be various rallies & pullbacks though the current trend is definitely down unless the price on the right edge could push above to $1.81 which may signal the downtrend is over. I may also switched back to trading mode & take profit first, especially if trade war is not resolved & may eventually rolled to a devastating snow ball that reignite a great depression (see Alessio Rastani's "Will A Trade War Kill the Stock Markets?")


SingTel's trading notes
Fundamentals as of 17 May 18's report:
PE@$3.31wEPS24c: 14x   PB 1.83x   norm.PE 10x
EPS FY18 33.35c; FY17 23.91c
4QFY18 4.77c, 4QFY17 5.89c

Dividend $0.175 2x; 26 July 18 ex-date $0.107, Dec $0.068
$0.175 to maintain till FY2020 except unforeseen circumstances, thereafter revert to payout ration 60%-75% underlying net profit, FY18 81% of underlying net profit.
Holding 10K cost $3.31
25/5/18 (Fri): SingTel buy back 440K worth at $3.34

18/5/18 (Fri): SingTel buy back $1mil.worth at $3.42-3.43

My purchase order for Singtel at $3.31 was triggered on 30 May 18, it was the support that have been tested 4th time but it broke at the 4th time. Once again, I struggled whether to cut loss (trading stop loss rule) or hold on; I decided to hold as dividend 10.7cent is due with ex-date on 26 July 2018. Furthermore, SingTel had made forecast to maintain $0.175 dividend for next 2 financial years unless there's unforeseen circumstances. On the right edge, the fall is long and painful and yet to see any consolidation or bottom yet. Based on dividend plan, I intend to average down with my balance 20% capital when there's a potential reversal signal that comes from weekly chart instead of daily as daily's indicators are flipping between green and red (MACD-histogram) thus negating the signal's validity. A potential threat is the flight of monies from emerging markets to US, similar to 1996's Asian Financial Crisis which may affect forex exchange when converted to SGD. Thus far SGD had also fallen but not as much compared to some of the other countries like Indonesia.

NetLink NBN Trust
Fundamentals as of 14 May 18's report:
FY2019 IPO projection est.4.6c, 2xDPU or 6% at $0.75; IPO Jul 17-May 18 3.2c, Nov 18 est.2.1c
Stable slow growing business

8 Jun 18: CEO bought 100K@$0.75, cost $75K
IPO $0.81
Holding 50K cost $0.75

I purchased this as I thought the volume during the pull back is lesser, thus the bullish divergence in force index. Furthermore, buying at the same price $0.75 as CEO should be quite ok as there's someone "with you". There's also various articles that cited the leverage cost of NetLink Trust tied to interest rate thus the distribution should be "safer" than the other REITs or SingTel. On the right edge, force index still somewhat shallower (ie.lower volume traded) than when it broke down from $0.815. If I could somehow exit Suntec REIT at a profit, I may switch to NetLink NBN Trust as its fundamentally safer though distributions are twice a year.

Final thoughts
The trade wars seem like the biggest threat now, all kinds of doomsday thoughts from Great Depression to Global recessions as the world deleveraged etc. On the other hand, World Cup had finally proceeded to quarter finals, so after that more traders will be back in the markets, perhaps that will reignite a new round of momentum, question is will it be more value shopping or panick exit?

I've finally passed my foundation course at SUSS for my Master of Counselling course, the next term's class is starting in August 18. Am expecting alot of assignments, exams, and less time to focus on investing. Not to mention my other personal new year resolutions like getting into work out habit, its been there for 5years but never disciplined enough to become fit :( 

Lets hope I have better results to share in my next update... Good luck! May the trend be with you...

Change of Investing Strategy

As I looked back my trading, they are comprised of primarily the following:

I. Penny stocks speculation
II. Major dividend (5%+) speculation
III. Buyout offer-price spread
IV. Alex Elder’s bullish divergence & impulse system
V. Adam Khoo’s bounce off moving averages
I and II were my initial experimenting which derives mixed results and call for subjective judgement which may be wrong at times, thus I ceased using them several years back.
III was one of my favourite but there isn’t that many buy out offers that presents meaningful spread based on the scenarios thus I also stopped using them.
IV is my most common strategy but with mixed results, honestly, I did not always follow its impulse censorship rules such as buying based on daily signal or wait for weekly impulse to turn blue as I felt price often moved up too fast to have enough risk return ratio based on exponential moving averages. Also using daily MACD-histogram as exit signal which often exited too early or not reliable as MACD-H could fluctuate between red and green.
V was a relatively new strategy that I learned from watching Adam Khoo’s videos. I did a trade and it worked out but felt difficulty to switch my paradigm to that as I was used to MACD & force index; it felt weird just looking at moving averages with stochastics.
I also initially followed his book and used his early fundamentals 9 steps screen but felt too much work and quite impossible to find a great counter with excellent 9 steps scores that meet the technical setup unless a major material development which often throw the entire fundamentals into question and requires quite astute decision and patience for it to work out.

While my greatest returns by % involve some speculation and intra-day penny stocks trades in 2013-2014, but my current work and commitments do not afford me the time to monitor as closely at times.
As for trading, I realised my results are negligible and lacks consistency, winnings often got reduced by big losses, then I struggled to break even.

Thus, moving forward, I decided to spit my war chest $160K into 2 portfolios; $80K of dividend yielding long term holding and $80K for trading at reduced per trade about $20K (instead of current about $30K per trade).
For dividend portfolio, my investing yardsticks would be as follows:
- Established business with consistent earnings of no more than 20% swings from year to year
(cyclical counters like property developers are excluded)
- Established dividend payout track records with foreseeable visibility of maintaining same dividend yield of at least 5%.
- Subject to weekly trading rules such as bearish divergence in weekly indicators / price actions; otherwise counters would be held.
- Possible stop loss of 5% from purchase or 1 ATR down
(to avoid possible fallen angels like Noble and the likes)
Due to the small $80K capital, it would likely be split among 3-4 counters, with an eventual 3 years goal of diversifying into more so that every month or so that could be some payout, and possibly some capital aside for rights issues.

As for my trading portfolio, I would likely keep the per trade amount smaller, praying for wisdom from God that I would judge the setup correctly and avoid disasters and also sticking to trading rules.
Trading strategies that may be deployed:
- Alex Elder’s MACD-H 4 seasons, bullish divergences
- Adam Khoo’s bounce trade and possibly others
- Scenarios based such as buyout-price spread arbitrage and others
To end, I hope to be posting monthly update as journaling would help me to reflect and hopefully avoid or realise earlier if I am fooling myself with certain trades.
Moving forward, I aim to do a monthly portfolio update.
May the trend be with us…

Next blog likely end Jun 18, I will be sharing my first 2 purchases for my dividend portfolio, I bought both towards end May 2018.