As I am typing this, I am seeing Dow Jones Futures hovering at 900 pts below yesterday closing number. This is the “first” 900 points change for quite a while.
Back in mid March to early April, we saw heart-stopping 800-900 points change on the Dow Jones index every few days. Since then, the US market has been on a steady climb from a very deep trough and people are even beginning to believe we would get a V-shape recovery.
But would today likely sharp drop be the start of a decline? And could the climb in the last 2 months be a bear market rally and we could see our stock indices testing new lows in the coming weeks/months as we have the 2nd wave of COVID infection globally? I don’t know but I sure hope not because it just means more people are going to be sick and more people are going to collapse under this disease, sigh 😦
Well, enough negative talk, let’s switch to something more positive.
I just received the last dividend announcement of my portfolio this quarter with Accordia Golf Trust (AGT) reporting their full year results today. As expected, AGT lowered their final dividend distribution by 20% compared to a year ago.
This has already become a trend since SPH Reit shocked the Reit investors for the first time almost 2 months ago with a significant cut in the dividend distribution. After that, every other Reit seemed to follow the same and slowly, we have gotten used to this sort of bad news.
But honestly this is a terrible news.
Here, I am trying to build a portfolio to provide me with a reliable stream of passive income when I am no longer employed, and such things rocked my confidence badly and made me wonder if my portfolio is sufficiently resilient. People said that this is unprecedented but isn’t every black swan event unprecedented …
Without an active income, this will be all that I have to keep me and my family going. If the cash income is not resilient, then we could be in trouble. No wonder there is a common saying that as we age, we should have an increasingly “safer” portfolio, i.e. having a higher proportion of bonds over equities. Some say that a good number to aim for in terms of percentage of bonds in your portfolio is your age, eg if you are 50 year old, 50% of your portfolio should be bonds. I think this is good advice.
As I tallied up my dividends just now, I calculated that the dividend yield I got at this point is 2.6%.
Last year at this same period, I got 3.1%. The decline means that I got almost 25% less in terms of absolute dollars of dividends this year.
Not surprising but just feeling a bit down.
I don’t think second half of this year will be better. Hence, I am not sure if I can still reach my aim of 5% yield on my portfolio this year.
We will probably see more companies reporting poorer results and reducing their dividend distribution to be on the prudent side. Hence, for income investors like me, we will have to hold the faith that this will pass (and hopefully soon) and our dividends will be back to the previous level in the coming years especially when I am no longer earning an active income.
In case you are interested, just to share, the following companies are my Top-10 dividend contributors in 1st half 2020.
They are mainly the Singapore blue chips and Reits … but wait, did you see it? … Singapore Saving Bonds … not bad indeed for a bond investment 🙂
|Hong Kong Land|
|Singapore Saving Bonds|
|Hutchison Port Holding Trust|
|OUE Commercial Trust|
Before I end this simple blog post, I just like to share what this COVID-19 incident has woken me and opened my eyes to in the areas of personal investment. There was so much REAL learning that I got at the frontline of investments in the last few months! 😱
(a) appreciate the risk of using margin for shares investment – mine oh mine, it’s scary when margin calls appeared FAST and FURIOUS!
(b) a black swan event can REALLY come suddenly and without warning
(c) the importance of having a warchest for a black swan event and please do the next step otherwise the warchest is useless!
(d) have the courage to use the warchest when it happens – it’s TOUGH, I can tell you.
(e) be brave to cut loss and make adjustment to your portfolio if it is not working – if anyone tells you this is easy, they are BSing you.
(f) it is crucial to have a diversified portfolio across asset classes like bond, equities, gold etc if you want to use it for passive income as certainty of income is needed. Moderate your expectation of returns – less return is better than no return or worse losses!
If there is interest, I may pick some of them to talk in future blogs
Are my learning similar to yours? Hope to hear yours too …
Till then have a great Friday and weekend.
See you soon.