Thursday, October 3, 2019

Give yourself a raise/bonus through dividend investing and Sep 2019- Monthly Finance Update

Given the current economic situation going into a recession, most of us might see our salary increment freeze or bonus cut again.. Even during normal economy cycle, the salary increment is most unlikely to match inflation. Very often , salary increment comes in at average 3% or below and a promotion raise of 5 to 10% if you are lucky. In some industries like telecom and O&G, some of my ex-schoolmates have been complaining that they have not received increment or bonus for ages. Some even have to take a pay cut to stay on the job. Nobody likes to be underpaid for sure and changing job might not be an alternative given the poor job market. Therefore , it is important to have a financial plan to get out of a stagnant income growth.

In this article, I will illustrate how I create my own income increment through dividend investing in the last 7 years + my 2019 projected dividend income.

Before I started my passive income investment journey, most of my saving are in FD or bank account earning a pathetic $1K to 7K for 18 years especially interest rate started to plunge after the 2008 GFC. For example , 500K of saving  yield 1.5% which will only earned me 7.5K . I think there was a few year after GFC when FD dipped below 1.2% pa making my interest earning stagnant at about 7+K just before 2013 even though I have a saving of about 700K. Since then, I started to explore bond investing which yield me around 3-6%  depending on investment grade( My Investment Journey ).

I started bond investing in 2014 with a portion of my capital and the annual passive income growth jumped by 17%. By 2015, after I gained significant experience in overseas bonds and reits investing , I decided to plow more of my capital into my investment . This resulted in significant growth in passive income from below 10K in 2013 to 15K in 2015, 22K in 2016 and 40K in 2017. When compare to my salary increment of 3% which yield around 4K+ based on 120K+ annual salary for the last few years, my passive income increment is significantly much higher at 5k (2015),7K(2016) & 18K (2017).  I gradually converted my capital from bank saving account to bond/reit/dividend stocks in 2015 and more in 2017 which explained the significant higher number as shown in the below chart.

Since 2018, I have invested about 90% of my free cash holding so I expect the investment growth income to be stablized since I will be injecting only saving from my main income. With a saving of about 100K per year and investing in financial instrument of 6% yield, I am expecting a 6k+ increment  annually on top of what I am getting this year (projected 64K Dividend & interest earned in 2019). This compares to what I can earn in bank saving account of 20K FD interest , I will be earning 40k+SGD extra this year. This is much better than what I can get from job salary increment of 4k+ and 22k bonus. With this extra increment of 40K from my passive income investment, I don't even bother to work too hard for a promotion. Since I have to work really hard for any promotion increment of 5 to 10% increment which is not worth the effort compare to my current investment income growth payout.  One important lesson was  that  if I do nothing , I earned the interest (1.5 to 2%) given by the bank and earned 15to 20k on a saving of 1 million . However, if I spend 10-20 hours in improving my capital ROI to 5 to 6% by investing in income generating asset (or debt), I significantly increase my income by another 40K per year from  a 1 million investment. 40 k per year increment is almost like 3.3K per month additional income. This is definitely better than me working OT or going all out to earn a promotion.

Annual Dividend/Interest Earned /Growth 2012-2019(Projected) Chart  

Sep 2019- Monthly Finance Update :

In Sep , I have sold off the remaining of Pitney Bowes bond (3KUSD) and my Flextronics bond (10KUSD) was called. Flextronic was one of the investment grade bond I bought in my earlier days using eTrade which ceased operation in Singapore. 

With the extra capital I have from my bond sales,I have bought 300 IMBBY (ADR) ,a tobacco stock that crashed 12% in Sep.  As I read through their  financial report,  IMBBY p
rice is now almost all time low at USD$22 and its lowest price was USD$21.94 during the GFC. Since then, the company has grown to a market cap of 24billion ,profit at 8.5 billion annually ,PE <7,dividend yield is at 9.94% (USD$2.5) ,cash flow/per share at USD$4.6 and payout ratio of 45% . While tobacco is facing strong headwind with vaping death but still see no reason why it has to crash to all time low. I think market was overreacting to a profit "growth" warning so I bought this as a contrarian trade and its current dividend of 12% .

On the local bourse, I bought 2 US reits based in SGX Eagle Htrust (15K shares) & KepPacOakReitUSD (10K shares) since they offered good bargain and margin of safety with a yield of 8-10% and P/B below 1.  I always believe it is important to have a geographical diversified portfolio.. I don't understand why Singaporean like to jump on a bandwagon of seemingly overvalued local reits . Most of the US/Europe reits are freehold and have much better finance metrics with sustainable annual dividend that are 2-4% p.a higher. This makes some of these US/Europe reits good bargain. SGX did a good job to have some of the US/Europe reits listed locally that take WHT out the equation making it easier for us to invest. We should really take this opportunity to invest in some of these foreign reits .

Dividends received in Sep2019 from Foreign Investment: USD $1995.19
Interest received in
Sep2019 from Foreign Investment (bond): USD $442.29
Interest received in
Sep2019 from banks interest/FD/others in US: USD $362
Realized gain/loss : USD $10.3

Dividends received in
Sep2019 from SGX:SGD$1031
Interest received in
Sep2019 from banks interest/FD/others in Spore: SGD $210
Realized gain/loss : Nil

Total dividend and interest from my investment portfolio + bank/money market account + trading gain/loss generated SGD 5035.

YTD Passive income earned from investment only: SGD $48037
My dividend/interest collected in Sep 2019 was slightly lower than 2018 due to advance dividend payout
in July from Cromwell Reit which is my largest holding . Otherwise, I should be expecting a bumper payout every September.

Dividend/Interest received from investment portfolio:

Investment portfolio distribution:

Monthly Dividend/Interest earned Y-to-Y changes from 2017 to 2019