Dear Smart Investor,
We all have seen the headlines …
Outlook for post-Covid recovery clouded, recession could hit ‘within next 2 years’: PM Lee
Morgan Stanley CEO sees 50% chance of US recession
US at ‘very, very high risk’ of recession, says Goldman Sachs’ Blankfein
Jamie Dimon Says JPMorgan Is Bracing Itself for Economic ‘Hurricane’
… and the outlook sounds dreadful.
Already, the US-based S&P 500 index has fallen into a bear market, and many fear that Singapore’s Straits Times Index (SGX: ^STI) is next in line.
Maybe they are right.
So, here’s a question: even if you are certain it is true, what should you do?
The games people play
If you own stocks today, wouldn’t it make sense to sell now and buy back later?
Now, that sounds like a reasonable idea …
… that is, until you consider the facts.
According to Hartford Funds, citing research from Ned Davis:
- Half of the S&P 500’s best days over the past 20 years happened during a bear market (yes, we are in a bear market today).
- Another 34% occurred during the first two months of a bull market — before it was clear that a bull market had begun.
In other words, the odds are overwhelmingly against us to perfectly time an exit AND re-entry into the stock market.
Chances are, if you sell, you likely will be left behind should the stock market decide to turn upwards.
And that can happen …
Remember the big stock market decline in 2020?
The STI recovered long before the Delta or Omicron hit our shores, and way before vaccines were announced.
Because here’s the truth …
The sellers today are offloading their stocks NOT because they know what is happening.
They are selling because they DON’T KNOW what is happening…
… and that means opportunity.
Dividends that beat inflation
Core inflation has been on the rise in Singapore, hitting a decade high of 3.3% in April.
The broader headline inflation rate, which includes housing and private transportation, is even higher, reaching 5.4% in the same month …
All of us are already feeling the pinch.
So, what would you do if you could get a REIT with a reliable dividend yield of 9%?
That’s what happened during the 2009 market crash.
Units of ParkwayLife REIT (SGX: C2PU) were sold off, sending unit prices down to a mere S$0.73 in April 2009.
At that point, units were offering a 9.4% yield.
Of course, such an opportunity does not just appear out of thin air.
This tasty yield was only possible because units were sold off indiscriminately during the Great Financial Crisis …
… over similar fears that we are seeing today.
And that’s not the end of the story …
If you held units of ParkwayLife REIT till today, you will be rather pleased with yourself.
You see, the healthcare REIT has raised its dividends from S$0.683 in 2008 to S$14.08 in 2021.
Source: ParkwayLife earnings and announcements
Adding up all the distributions from 2009 to 2021 would have netted us a handsome S$1.49, twice the S$0.73 we paid in April 2009.
This performance has not gone unnoticed.
Today, units of the REIT tip the scales at S$4.81, a near-560% gain for buying and holding its units.
Now, that’s a game we prefer.
Get Smart: Be prepared
Maybe you think that this is NOT the right time to invest.
We have no arguments here.
But what if the market falls further and you decide that you want to invest?
Will you be ready to act?
Will you have a list of stocks that you want to buy?
At The Smart Dividend Portfolio, we have a list of 25 stocks that we think are among the best in the Singapore stock market.
All of these stocks pay a dividend.
That’s not all we do.
Not all stocks offer the same opportunity.
We spend our time sizing our stock positions to the opportunity that we see.
Is it a good time to buy into Singapore REITs? If you’ve thought about it, then our latest REITs guide will be an essential read. This exclusive pdf report shows you why REITs are still excellent assets, what sectors to look out for and how to find good REITs today. The info inside can help you build a solid retirement portfolio. Click here to download it for FREE.
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Disclaimer: Chin Hui Leong owns shares of Parkway Life REIT.
