HongKong Land reported its full year results and the dividends to be distributed last week. While it kept the same dividend amount, i.e. 22 cents/share, it actually suffered a net cash OUTflow of S$533 Mln (vs INflow of +US$508 Mln in 2020).
It can afford to do so only because it has a lot of cash on their balance sheet – US$ 1.4 Bln to be exact. In 2021, it even started a share buyback program and had so far spent US$192 Mln. This has helped to push up the stock price to a new stable level at $5.00-5.50.
However, there is no way it can sustain this forever if it doesn’t generate a positive cash flow soon. So, I am monitoring and may want to exit if I don’t see any turnaround in cash flow.
Dividend Yield of My Portfolio
Talking about dividend, HongKong Land was the last company in my portfolio to report results. With that, I can now tabulate the amount of dividend that I would be getting in the coming two months if I don’t sell any shares from my portfolio.
The total dividend amount adds up to 1.6% of my portfolio value. I am tempted to multiple this by 4 to project a yield of 6.4% by the end of the year. However, that is too simplistic. I noticed over the years that dividends collected from results announced in Q1 typically add up to ~ 35% of my total dividend. So, a more realistic expectation is 4.5%.
This is lower than my long term target of 5% but similar to what I got last year – 4.6%. This surprises me a bit as I know many companies have increased their dividends payout in this latest quarter.
Downsides to Diversifying from SG to US market
However, I rationalise that this is just a result of my diversification to US and HK markets.
It is no secret that investing in SG market typically yields good dividend. SG market is dominated by Banks and Reits. Their dividend yields are rather high.
So with my overseas equity investment rising from 28% of total equity investment in Aug last year to 36% today. I should not be surprised that dividend yield for the overall portfolio would drop.
US company generally doesn’t pay high dividend rates. Furthermore, for every dollar$ of dividend that they declared, I will need to pay 30 cents in withholding tax as I am an overseas investor. That reduces the yield to me further.
This is something to take note if you are planning to invest in US markets – don’t invest for dividend sake.
This is the price to pay for diversifying to US market. And now I am suffering from double whammy – lower dividend yield and declining share prices. This is extremely painful.
However, I intend to still push on.
I can only hope that this is the right decision and will pay off in the long run.
Have a great week ahead.