Phillip SGX APAC Dividend Leaders REIT ETF

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(12-10-2016, 10:57 AM)mobo Wrote:
(12-10-2016, 10:12 AM)weijian Wrote:
(11-10-2016, 12:48 PM)MINX Wrote:
(11-10-2016, 11:39 AM)mobo Wrote: The term "Dividend Leaders" is a misnomer considering this ETF is 100% REIT driven. Distributions are not dividends and in current low interest rate environment, it is simply not possible for a broad based index focused in AU, HK and SG to generate 5.19% "dividend yield".

Asset managers have deliberately conflated the two distinctive financial terms in their self-promotion. This is a potential major hazard down the road as I understand a lot of retired senior citizens are living on such "dividends" under the wrong impression that they are safe and sustainable.
Care to explain to me why distributions are not the same as dividends? 
Why do you say that these dividends are not safe & sustainable?

To answer your question, one would need to look into each and every REIT on their "capital structure" (gearing, type of loans etc). A dividend is defined as a distribution out of excess earned profits, rather than out of capital. So even though some of the leasehold type of Trusts disguise their "return of capital" as profits, it should still be considered dividends, based on the definition.

"Safe" is a really relative term. So unless we have a reference point for "safe", then there is no point to start a discussion here, since all of us have different notions for it.

I reckon a lot of retired senior citizens were once regular salary-receiving employees. This explains why they would continue to seek "regular dividends" from their investments, when it should be very clear to them, that along the way as they aged, they should have observed that the really rich people are the ones who focus capital gains over dividend payouts. For those retired senior citizens whom have held the big caps/blue chips (low dividend yield when they purchased it donkey years ago, but has a higher probability to keep growing with GDP), kudos to them. I do suspect that those who piled a large portion into REITs (and depend on its predictability/high yield) are not going to end up as per intention.

Thanks. Actually it is much more complicated that "capital structure", there is nothing inherently wrong with the leverage or type of loans by most REITS. It is a combination of the REIT operating model and financial engineering quirks that render the difference in the concept of distribution and dividends. It's a pretty technical subject which I hope to touch on in more detail when I have some time.

I think for the purposes of discussion it is acceptable in most cases to classify a distribution as a dividend since in the context of most REITs, the distribution is paid out almost entirely from accounting profits. Otherwise, if we delve deeper into the technicalities, you can also argue that REITs are not exactly "shares" or "stocks" either but "trust units". 

On the IPO, I must admit I have not read the prospectus in detail as a headline dividend yield of 5.19% from mostly Aussie REITs (>59%) hardly sounds exciting to me. Because of the composition, I would not compare this yield directly with what you can get from Singapore REITs as the Australian interest rates are higher than Singapore's (10yr Aussie govt bond is at 2.30% vs Singapore's at 1.90% according to Bloomberg) translating into a lower risk premium for this ETF. The relatively high expense ratio is also a no no for me. 

What I am curious though is how the higher earnings yield of 9.69% [1/(P/E)] translates into a dividend yield of just 5.19% (granted an Aussie withholding tax of 15%) given that most REITs are supposed to pay out 90% or more of their accounting profits.

Edit: Sorry for the multiple quotes Tongue
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RE: Phillip SGX APAC Dividend Leaders REIT ETF - by Debronic - 12-10-2016, 03:34 PM

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