About Dividend Is King

 


Background 

My parents are middle-class Singaporeans living in Singapore, nearing retirement in the next 5-10 years. They live a frugal lifestyle and have mostly invested in bonds and insurance endowment plans since they started working, with little investments in the stock market. In the past, investing in the stock market was not easy, as you had to contact your broker to purchase stocks and had limited access to online information about the market. Now that they are nearing retirement age, they wish to transform their financial portfolio to a passive income investment fund where they can preserve their capital and live off the stable dividends. I have named their investment fund as 'Dugong Management'. 

Strategy

Singapore is the perfect country for a dividend investor. There are no taxes on dividends earned, and the Singapore stock market consists mainly of Banks and REITs, which have a long history of paying out stable, relatively high-yield dividends. 

My strategy is simple. I will utilise the funds from their matured insurance endowment plans, bonds, and CPF ordinary account over the next few years to purchase stable and relatively high-yield REITs and Bank stocks. 

My criteria for purchasing a REIT are as follows:
1. Strong Sponsor (CapitaLand, Frasers, Mapletree) 
2. Long dividend history of >10 years 
3. Reliable dividend payouts 
4. Portfolio occupancy rate >90% 
5. Healthy debt gearing ratio 
6. Dividend yield of >6.0% 

Goals

My ultimate goal for my parents is to create a passive income fund of a minimum of $3,000,000 with an average yield of 6.0% by 2032, with an average monthly payout of at least $15,000. This will allow each of my parents a monthly income of around $10,000 each (combined with CPF payouts and monthly lifetime insurance payouts) to enjoy their retirement. 

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