Initiated A New Position To Diversify Away From REITs

As per my previous post, I wanted to rebalance my portfolio to gradually make my overall portfolio a little more diversified, because currently, based on capital invested, about 56.0% is concentrated in REITs, 34.5% in non-REITs, and the remainder in US Growth Portfolio.  However, market has its way of rebalancing my portfolio allocation for me, especially in the period after the US Presidential Elections where REITs experienced yet another deep dive in share prices while the local banks and US markets undergo a huge rally.  As such, as of 9th November, the allocation based on market value was 46.4% in REITs, 40.5% in non-REITs and the remainder in US Growth Portfolio.

As a self-proclaimed dividend investor, the share price, though important from the perspective of capital gains and losses, matters less than the stability and predictability of dividend income.  Inevitably, there is a relationship between share price and distribution per unit, as the lackluster performance by any company is the main reason for the decline in its share price, and the subpar earnings will most probably result in a decline in distributions as well.

With that in mind, probably the better way to maintain a stable stream of dividend income will be to diversify a little more so that any cyclical performances by the companies and REITs can be balanced out by one another.  A good example will be the current situation where banks and REITs are seen to be complementary to each other's sector, and in such harsh times for REITs, and decline in their distribution per unit (DPU) can be countered by the increase in dividend payout by the banks.  I do understand there are some who says that 'diversification are for those who do not know what they are doing'.  Whatever it is, I am no investing genius, so I would very much prefer to take the diversification path and sleep well at night.

Back to the topic.  In September and October, I shortlisted a few companies to initiate a position.  Do note that these are not buy recommendations, just my personal preference based on my understanding.  The companies I have shortlisted are ComfortDelgro, Sheng Siong, Vicom and QAF.  Basically, Sheng Siong, Vicom and QAF are cash cow with little to no debt.  ComfortDelgro, on the other hand, hinges on growth story, especially in the UK.  After much deliberation, I decided to initiate a small position of just 900 shares in ComfortDelgro.  

Some of the reasons why i reached this decision come from analyst reports from UOB Kayhian, RHB and Maybank.  As I have no financial background and does not any excellent insight in the company's financials, it will be better to leave the explanation to the experts and for anyone interested, feel free to click on the link above to read the respective analyst's report.  Personally, based on what I can understand, I like what I see and the numbers seem to be improving in the past 3 years.  In the latest half yearly report, they reported double digit growth in revenue and net profit compared to the same period last year.  That could probably be the sign that the worst may be over in the near term.  Another main reason why I decided to buy ComfortDelgro is because it is also the main shareholder of Vicom and SBS Transit.  This means that if Vicom continues to be a cash generating powerhouse, ComfortDelgro gets to benefit from this as they get the dividend income from both Vicom and SBS Transit.  As such, buying into ComfortDelgro also means I am indirectly investing in both Vicom and SBS Transit.  

However, I understand not all is sunshine.  Being a transport company, it faces much challenges.  If we take a look at it's performance over the past 20 years, one would not have enjoyed any capital gains if one buy and hold during this period.  The main competitor they have to deal with are successful private hire companies like Grab in South-East Asia and Uber in other parts of the world.  However, based on ComfortDelgro's annual reports and statement from the Chairman, their core business and expanding bus and taxi business overseas are reaping fruits, more than adequately compensate from any competition from these private hire competitors.

Furthermore, one main positive point for dividend investor like myself, is that ComfortDelgro has been paying out dividends without fail since 2003, even during the 2020 pandemic.  Even though there are fluctuations in the amount of dividend per unit paid yearly based on the company's performance, this is reassuring for dividend income investor like me to know.

That's all for now.  Hopefully this investment pay off in the longer term.  I will continue to include more companies into my portfolio.  Waiting for a good opportunity and a good price to initiate a position in Sheng Siong as well in future.  Barista FIRE, here I come...!