Finally I Sold Hong Leong Finance

This month marked the end of a position that had quietly sat in my portfolio for about 7 years - Hong Leong Finance (HLF).  This was not a reactive sale, nor an emotional one.  In fact, it was something I had been observing, tolerating, and reassessing for quite a while.

Back in 2022, I wrote about why I chose to accumulate HLF within my portfolio.  The reasoning was simple and aligned with my dividend investing philosophy at that time- stable income, reasonable yield, and a business model that, while not exciting, was dependable.  I was never expecting explosive growth.  In fact, I explicitly acknowledged that the share price would likely remain range-bound, and it did exactly that.

In the recent few years, while bank stocks were hitting new highs again and again, HLF stayed within its familiar price range.  This, by itself, was not a problem, as it was within expectations.  A range-bound stock with stable dividends could still serve a purpose in a Barista FIRE portfolio.  But the key word here is stable, and that was where the story started to change.

There were two main triggers that ultimately led me to exit the position.

First, during the 2025 AGM, Mr Kwek mentioned that there would be “surprises” ahead.  I did not expect anything dramatic, but I took it as a signal that management might have plans to unlock value or improve the business trajectory.  Up to now, nothing material has come out of that statement.

Second, and more importantly, the dividend continued to decline, which was more of a shock rather than the surprise intended.  For FY2025, the dividend came in at SGD 0.089.  At a share price of around SGD 2.55, that translates to roughly a 3.5% yield.  This was a meaningful drop from what the stock used to offer, and it fundamentally weakens the case for holding it.

Just to set the record, a lower yield on its own is not an issue.  I am comfortable holding stocks with lower yields when there is clear justification.  Singapore Technologies Engineering is one example, whose yield has fallen below 2% due to its strong business and drastic share price appreciation over the past year.  ParkwayLife REIT is another, whose yield has been below 4% mostly, but distribution per unit (DPU) has been growing consistently over time.  

In both cases, the trade-off is clear and acceptable.  Business were improving and there was clear visibility to overall profitability.

HLF, on the other hand, no longer offers that balance.  The share price remains range-bound, and the dividend is trending down.  The original thesis was built on stable income, and that stability is no longer present.  Even smaller competitor like Sing Invest and Finance is showing better results dividend growth.  Without income reliability or growth, the role it was meant to play in my portfolio is no longer being fulfilled.

At current levels, a 3.5% yield does not stand out.  There are other opportunities in the market that offer similar or better returns, with either stronger growth, better visibility, or more consistent distributions.  Holding on would simply mean accepting a weaker position out of habit.

As I continue progressing towards Barista FIRE, capital allocation becomes increasingly important.  Every dollar tied up in a position has to justify its place.  When the thesis no longer holds, the right move is to redeploy that capital elsewhere.  This is one of those cases.  Barista FIRE, here I come...!