Regular readers know that First REIT is one of my oldest investments in my portfolio of S-REITs. One of my earliest blog posts said how this was an investment for keeps. That was in March 2010. Time really flies. It has been almost 4 years.
First REIT: This one is for keeps.
Over the last few years, I made use of opportunities to buy more units of First REIT's. These opportunities were in the form of a rights issue and market corrections.
Bloodbath continues and AK71 went shopping!
First REIT: Rights issue.
I became an investor of First REIT's in 2007. The price was 75c a unit.
During the Global Financial Crisis (GFC), I bought more at 42c a unit.
When it had a rights issue at 50c a unit, I took up my allotment and even bought nil-paid rights from unit holders who didn't want to fork out 50c a piece for their rights units. Those cost me 66c a unit in total.
During a fierce correction in 2011 which people called a bloodbath, I bought more from 74.5 to 77c a unit. It was a decision which I used Technical Analysis to help me in, with the belief that there was nothing wrong with the fundamentals of the REIT.
Some may ask why would I buy at those prices which were higher than what I paid during the GFC or rights issue. Perhaps, an old blog post will throw light on this.
First REIT: XR and fair value.
As income investors, we are, no doubt, interested in distribution yields. With Q4 DPU coming in at 1.97c, the annualised distribution yields on costs now work out to be 10.23% to 18.76% per annum.
Although the unit price of First REIT has retreated from a high seen sometime middle of last year, sharing the same fate of all S-REITs' after a mention of "tapering" by Mr. Ben Bernanke, a unit price of $1.06 today is still 1.37x to 2.52x my entry prices.
Is there any purpose in sharing these numbers with you? Well, if we ask what did I do to make these numbers an integral part of financial security for me today, we will have our answer.
Although some might feel that I am revealing a secret, what I am doing is just sharing a process. There is nothing sacred about this. It is just the way I think:
1. Know our motivations. Are we investing or trading?
2. If we are investing, are we investing for growth or income?
3. Will REITs help meet our objectives?
4. What are the fair values of the REITs in question?
5. Fair values are most probably subjective but without any idea of fair value, we will not know when to buy and avoid overpaying.
6. Know our investment well and stay updated. Know the strengths and weaknesses. Know the benefits and risks.
7. If we are investing for income, we could still trade around our long position while staying mostly invested. This could enhance returns.
See? Nothing magical. Anyone can do this.
Now, some have asked me if they should buy into First REIT at the current price. Questions like this are always difficult to answer, for obvious reasons.
Personally, I always like to buy cheaper. So, I like to buy a good REIT when there is a discount to NAV and when distribution yield is higher, all else remaining equal.
First REIT's NAV/unit is now 96.64c.
Of course, if people are investing for income, finding the yield acceptable and the fundamentals good, they could initiate a long position in the REIT, bearing in mind the risks involved. Don't just focus on what is good. Know also what could go wrong and if it is acceptable to us. It is only natural that people would have different levels of risk appetite.
REITs: When to buy?
Do the right things and the rights things will have a higher chance of happening for us.
So, is there a simple way to a double digit yield? Yes. Not easy perhaps but simple.
1. First REIT: Revelation.
2. Are you ready to come out on top from a recession?
3. Motivations and methods in investing.
4. 3 points in stocks investing.
5. The mystical art of wealth accumulation.