Hi, I’m Ian.

I’m a dividend investor who derives regular income from a portfolio of REITs listed on Bursa Malaysia and the SGX.

At the moment, if given a choice between the two countries, I would go with REITs listed in Singapore over ones in Malaysia. This is because the REITs in Singapore are larger in size, have a globalized property portfolio, and ….. most importantly, are cheaper. Thus, they offer higher dividend yields with greater stability at current prices today.

With that said, there are 40+ S-REITs to choose from and you have got to be picky as they differ in asset classes, financials, and stock prices. If you need a quick guide on S-REITs, you may visit the Fifth Person, a site which recently was awarded the best independent investment website by the SGX for LIVE Daily Updates on S-REITs.

In this article, I’ll share a tip which is useful to do a final due diligence before investing in a S-REIT, which is – How to Calculate Your Net Dividend Yields before Purchasing Your S-REIT?

 

So, here we go:

I’m going to use Mapletree Commercial Trust (MCT) as a case study. Briefly, MCT is a S-REIT that owns a portfolio of prime commercial real estates such as VivoCity, Mapletree Business City 1, PSA Building, Mapletree Anson, and Bank of America Merrill Lynch Harbourfront.

 

#1: Gross Dividend Yield

First, let us start by calculating its Gross Dividend Yield. Today, MCT’s stock price is trading at S$ 1.58 a unit (10 August 2018). In 2018, MCT has paid out 9.04 cents in distributions per unit (DPU). Thus, its gross dividend yield is:

 

Gross Dividend Yield Formula:

= (Gross DPU / Current Unit Price) x 100%

= (S$ 0.0904 / S$ 1.58) x 100%

= 5.72%

 

If you invest in MCT today, you won’t receive 5.72% in net dividend yield if MCT maintains 9.04 cents in DPU over the next 12 months. This is because you would incur transaction fees when you buy & sell SGX-listed shares and nominee fees when you receive dividends from your stocks. You would incur nominee fees as S-REIT stocks are purchased under a nominee account. This is explained in my article – SGX Hacks for Malaysian Investors.

The amount of fees incurred differ from one broker to the next. Here, I won’t say which broker is the best. But, if you need a quick reference, you may view a comprehensive list of local brokers at iMoney.my. Presently, I use Maybank IB as my preferred broker as it is more convenient to me. Thus, I would write and illustrate the calculation of net dividend yields based on fees charged by Maybank IB at the moment.

Before calculating net dividend yields, we need to first calculate the net DPU after deducting nominee fees and the actual cost per unit for S-REIT. Thus,

 

#2:  What’s my Net DPU?

I incurred a nominee fee of S$ 1.73 for each distribution from one stock.

Thus, my net DPU from a S-REIT depends on the number of units that I had purchased. Let us assume that I do not own any MCT units presently and the investment into MCT is my first. To calculate my net DPU, I need:

 

Gross DPU = 9.04 cents

No. of Units to Invest: 1,000 units

Nominee Fees = S$ 1.73 per distribution

Frequency of Distributions (FOD): Quarterly (4 Times a Year)

 

My Net DPU Formula:

= ((Gross DPU x No. of Units) – (Nominees Fees x FOD)) / No. of Units

= ((9.04 cents x 1,000 units) – (S$ 1.73 x 4)) / 1,000 units

= ((S$ 90.40 – S$ 6.92)) / 1,000 units

= S$ 83.48 / 1,000 units

= 8.348 cents / units

 

#3: What if I buy 2,000 units instead of 1,000 units?

Your net DPU would be higher if you buy 2,000 units instead of 1,000 units. I had worked out the calculation below:

 

 

Gross DPU = 9.04 cents

No. of Units to Invest: 2,000 units

Nominee Fees = S$ 1.73 per distribution

Frequency of Distributions (FOD): Quarterly (4 Times a Year)

 

My Net DPU Formula:

= ((Gross DPU x No. of Units) – (Nominees Fees x FOD)) / No. of Units

= ((9.04 cents x 2,000 units) – (S$ 1.73 x 4)) / 2,000 units

= ((S$ 180.80 – S$ 6.92)) / 2,000 units

= S$ 173.88 / 2,000 units

= 8.694 cents / units

 

#4: What’s my Actual Costs for Investing in MCT?

I’ll work out two calculations: 1,000 units and 2,000 units.

I incur around S$ 32 per transaction, mainly brokerage fees. Thus, you would need the following to calculate the actual cost before investing into S-REITs:

 

1,000 units:

Current Stock Price = S$ 1.58 a unit

No. of Units to Invest: 1,000 units

Transaction Fee = S$ 32

 

My Actual Cost Formula:

= ((Current Stock Price x No. of Units) + Transaction Fee) / No. of Units

= ((S$ 1.58 x 1,000 units) + S$ 32) / 1,000 units

= (S$ 1,580 + S$ 32) / 1,000 units

= S$ 1,612 / 1,000 units

= S$ 1.612

 

Note:

This is applicable if your investment is below RM 20,000 a transaction (Not official by Maybank IB. If you intend to invest more than RM 20,000 for one S-REIT in one single transaction, the transaction fee is fixed on a percentage of 0.4%

 

 

2,000 units:

Current Stock Price = S$ 1.58 a unit

No. of Units to Invest: 2,000 units

Transaction Fee = S$ 32

 

My Actual Cost Formula:

= ((Current Stock Price x No. of Units) + Transaction Fee) / No. of Units

= ((S$ 1.58 x 2,000 units) + S$ 32) / 2,000 units

= (S$ 3,160 + S$ 32) / 2,000 units

= S$ 3,192 / 2,000 units

= S$ 1.596

 

#5: Finally, my net Dividend Yields …

Let’s finalized the net dividend yields for MCT if I invest:

 

1,000 units:

= (Net DPU @ 1,000 units / Actual Cost @ 1,000 units) x 100%

= (S$ 0.08348 / S$ 1.612) x 100%

= 5.18%

 

 

2,000 units:

= (Net DPU @ 2,000 units / Actual Cost @ 2,000 units) x 100%

= (S$ 0.08694 / S$ 1.596) x 100%

= 5.45%

 

Hence, if you are certain about an investment in S-REIT, it is better to buy in larger quantity to boost your net dividend yields.


Ian Tai
Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia.

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