Wednesday 12 June 2024

Portfolio Purchase: Utdhampshire REIT & Hang Lung Properties

02 purchases have been made and with that conclude my bout of new companies addition.

Utdhampshire REIT:  I have covered this REIT before. It is in the US suburban retail business. My analysis can be found here here 

The REIT has sought to manage the risk of its balance sheet by reducing its payout ratio to 90%. I am expecting a 3.8 US cents annual dividend. 

Secondly, what surprised me was how valuation at year end was not a negative which would have breached MAS leverage limits. Given the 2 positives, the new dividend is sustainable and I am expecting Utdhampshire REIT to be a 10% dividend yielder. The interest coverage and leverage ratios should be within MAS limits.

Hang Lung Properties (HK): The second addition is Hang Lung Properties. It is in the retail mall segment and small part office in China and Hong Kong. The consumer segment it targets are the wealthy and upper middle income, relatively stable. The company owns malls and leases it to tenants. Similar to how Capland China Retail Trust operates.

While its payout ratio stands at 90% and at 78 HK cents, it is sustainable given how its mall rents have been increasing. It is a 11% dividend yielder. Its leverage ratio is much lower than many of Singapore local REITs. Hence for a less leveraged balance sheet than SG reits and its dividends, it is a worthy addition.

Asset Sale: 50,000 shares of Keppacoak was sold to finance the purchase of Utdhampshire. This was due to the limited cash I have and Utdhampshire went slightly down today to warrant a buy.

Dividend Portfolio

My portfolio should now provide approximately SGD$20,000 in annual dividend. Overseas REITs and blue chip HK shares are giving extremely good dividends because the risk free rates are much higher, therefore, dividend stocks with business in these countries have to offer a yield higher than risk free (in the region of 5.25%). 

In addition, due to the negative sentiments surrounding China companies, the sell down has made them double digit div yielder with its business not as adversely hit. They are companies worth owning.

The other advantage I am sitting on is that as global interest rates starts to be cut, the distributable income avaliable from REITs I own will be higher because interest expense is lower. This will naturally lead to a growth of dividends. For the US Commercial REITs, another hurdle to clear is that they survive their loan refinancing. Hopefully this comes to pass in the next 2 months.

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