Dear Mr Tan,
Attached please find a list of a few bank preference shares and REITs in SGX for your reference.
| Name | Annual Distribution | Price / Lot | Yield |
| DBS NCPS 6% 10 | $ 60.00 | $ 1,046.00 | 5.74% |
| OCBC BK 4.2% NCPS | $ 42.00 | $ 1,000.00 | 4.20% |
| OCBC BK 4.5% NCPS 100 | $ 450.00 | $ 10,050.00 | 4.48% |
| OCBC BK 5.1% NCPS 100 | $ 510.00 | $ 10,441.00 | 4.88% |
| Ascendas-REIT | $ 134.80 | $ 2,060.00 | 6.54% |
| Cambridge Industrial REIT | $ 49.52 | $ 500.00 | 9.90% |
| Parkway Life REIT | $ 82.80 | $ 1,430.00 | 5.79% |
| Suntec REIT | $ 101.12 | $ 1,440.00 | 7.02% |
The yield is estimated based on the latest known distribution/dividend (eg. for the last quarter results announced) and the closing price yesterday. The few REITs selected have been consistently paying distributions for the past years but as the prices have gone up, the yields look less attractive now. The bank preference shares pay a fix dividend, the yield can be improved if we manage to buy at a lower price.
Personally, I will not venture to say shares are safe now, as there is great price volatility. Over the long term, the odds are they will give a better yield than fixed deposits/money market funds but with the risk of capital loss as the share prices are not considered low now. If we managed to purchase at the time of the last financial crisis, I would safely say that these will be high yield, long term investments.
KSL
My comments
Please take note of the comments about the preference shares as mentioned by Pang in the comments. It seems that dividend on the preference shares will reduce after a certain date to a lower level, based on the interest rate of the banks plus a spread. This will give a lower yield than the yield indicated above.
Someone asked me, "What is the risk of investing in the preference shares of the banks?"
ReplyDeleteMy view is, "quite low". For the preference shares to go bust, the bank must go bust. In that case, all the shareholders will lose their investments. Usually, the banks are "too big to fail" and will be bailed out by the government.
If the bank continue to operate successfully, the preference shareholders can get a return of 4% to 5% per annum.
If the bank gets does not make profit, it is possible that the dividend will not be paid for that year. If it is non-cumulative, the dividend that is skipped will not be paid in future years, but the dividend for subsequent years will be paid, if the bank becomes profitable again.
in the usa, even the preference shareholders will need to take a haircut like bond holders. so even if the bank does not fail, your investment may be down to 10% after the hair cut.
ReplyDeleteDear Mr. Tan,
ReplyDeleteI would like to provide additional information on DBS NCPS 6% 10 .
DBS NCPS 6% 10 will pay 6% interest up to 15/5/2011.
Thereafter, it will pay at the rate of 3-month SOR + 2.28%.
The average rate for the current 3-month SOR is about 1% (please verify).
If the 3-month SOR remains the same after 15/05/2011,
then the interest rate after 15/05/2011 for DBS 6% NPCS will be around 3.28% only.
Pang
Some of the above interest rates are not perpetual.
ReplyDelete(1) DBS 6%NCPS 10 : pays 6% until 15/5/2011, thereafter the rate will be 3-mth SOR + 2.28%.
(2) OCBC Cap 5.1% NCPS : pays 5.1% until 20/09/2018, thereafter the rate will be 3-mth SOR + 2.5%
(3) OCBC 5.1% NCPS : pays 5.1% perpetually
(4) OCBC 3.93% NCPS : pays 3.93% until 20/03/2015, thereafter the rate will be 3-mth SOR + 1.85%
Pang
Hi Mr Pang, what about the OCC 3.93% NCPS 10? Pardon me as i am quite new to this. i had purchased it yesterday at $100.24. When should i sell it? is it expected to to be stable?
ReplyDelete