Latest Stock Buy Back Trends

I really like Professor Damodaran’s blog on economics.

Today he discuss on the latest stock buy back trends and a shift away from giving dividends.

So, what has caused this  movement away from dividends in the last two decades? It cannot be that dividends are taxed more heavily than capital gains: Note that dividends have been taxed at much higher rates than capital gains going back to the early decades of the last century. In fact, in 1979, the highest marginal tax rate on dividends was 70%, while it was only 28% on capital gains. The changes in the tax laws in the last three decades have reduced the tax disadvantage of dividends - in fact, they have both been taxed at 15% since 2003 - and cannot therefore be a rationale for the surge in buybacks. It also cannot be attributed to companies thinking that their stock prices were too low, since these buyback surge occurred during the bull markets of the 1990s and 2004-2007, not during down markets.

[Read the rest from Professor Damodaran’s blog >>]

Why you should apply for Excess Rights:Instant Jackpot Profits!

A lot of people are unfamiliar with Rights Issues for the company they invest in. This is because it is seldom discussed.

What is Rights Issue

Rights Issues is a method for the company to get additional funding for business.

The business is essentially make up of Assets = Debt + Equity.

There are 2 ways a listed company can seek large funding. One is by issuing more debts, the other is more equity.

Rights issue is to issue more equity.

A company will typically declare a 2 for 1 rights issue or another ratio meaning for how many existing shares you can apply for another number. In the case of recent First REITs rights issue, it is 5 shares for 4.

What is Excess Rights

Not all existing share holders can apply for rights issues.

1. Foreigners typically have restrictions of not able to.
2. Some existing share holders are not willing or do not have enough capital to do that.

You can apply for these excess rights

As long as you become share holders you can apply for these rights and excess rights.

Applying for rights provides no kicker. It is just to prevent dilution of your existing shares.

The kicker is the excess rights. It is basically like IPO jackpot. These rights is normally at a huge discount from current traded price.

In the case of first reit it is trading at eventual 70 cents but your cost of acquiring these rights is at 50 cents.

Take a look at this example here to understand why getting 2000 excess rights can mean a small win: First REIT Excess Rights Results: I got 2750 excess rights!

Look to Emerging Markets for higher yield dividend investing

I talked a fair bit about investing in US Stocks, specifically Dividend Aristocrats, Champions and Achievers.

Now these are made up of really great dividend companies and highly stable ones, but to other investors a yield of 3% BEFORE withholding taxes cannot be called high yield investing.

If you would like to move out of a certain proximity bias and touched emerging market stocks, there are many value buys presenting 4%-10% dividend yield yet enables you to invest in a country stalwart with a wide economic moat.

Should Starhub,M1 and Singtel fear apps like Whatsapp, Pingchat, Skype and Viber

Today we saw the news of this new VOIP service called Viber going viral. Viber is a voip application like Whatsapp on the iPhone that provides good quality voice and the ease of finding your friends who have viber as well without additional means.

All in all it was great, as is Skype. It makes you wonder why you would want to pay for voice plans for 20 dollars.

InvestmentMoats.com have a great coverage and more thoughts @ iPhone App Viber will killl telcos sooner rather than later.

Do you think VOIP is in the near future?

The myth about REITs and business trusts being good investments for you

REITs, Shipping Trusts are some of the good types of investments that you should add to your portfolio. Or is it? Many do not know that ultimately the owners that sells the properties to the REITs are the overall winners and investors are only taking much of the burdens.

Generally, no business trust will pay down its debts, because it is not in the interest of the trust manager to do so. The trust manager is paid as a percentage of assets, not equity. Therefore, the incentive is to borrow as much money as possible to raise the assets under management, thus raising fees, and never pay down the debt except under duress from banks.

An investor in a business trust has to understand that the trust structure is basically a packaging gimmick. It is given tax incentives by the authorities to encourage a more “sophisticated” capital market. Essentially, the original owner of the assets can enjoy tax savings if he owns the assets through a trust instead of within a normal corporate structure. With an IPO his ownership decreases, but he then enjoys the management fees. As a result he gains several advantages:

1. The management fees are economically an inflation-indexed annuity;
2. Partial asset divestment through the IPO raises cash for other higher-return projects;
3. Reduced ownership reduces the amount needed to fund a future rights issue; and
4. Trust distributions are taxed at a reduced rate (normally 10%)

Net-net, the overall income decreases slightly as the reduced share of trust income is partly offset by the management fees, but the potential liability decreases greatly. It is a huge risk-reward improvement.

Investors should not harbour any delusions that REITs are created primarily for their benefit. REITs are created first and foremost to help owners dispose of unwanted assets.

[Read the rest of this entry here >>]

For Starhub, M1 and Singtel investors, Morgan Stanley’s Internet Strategy update

If you invest in the 3 telcos in Singapore for growth or dividends, or for the matter telcos as a whole, you should read this powerpoint slides.
It gives you direction where the technology and telecom world could be headed
Internet Trends Presentation

Important Dates for First REIT rights issue

Some of you have asked for what are the important dates for rights issue. Here it is

• XR to register for rights issue : 3 Dec 2010
• Commencement of “nil-paid” rights trading period: 8 Dec 2010
• Close of “nil-paid” rights trading period: 16 Dec 2010
• Close of rights issue: 22 Dec 2010
• Expected date of issue of rights units: 30 Dec 2010
• Completion of the MRCCC Acquisition and the SHLC acquisition: 31 Dec 2010
• Commencement of trading of rights units: 31 Dec 2010

Full coverage can be found here http://www.investmentmoats.com/money-management/reit/first-reit-announces-acquisition-and-rights-issue/

Information on Indonesia Healthcare industry and First REIT healthcare REIT

If you want to invest in a healthcare REIT, you wanna know a lot of the demographics and future trends for that area of investment.

First REIT, a Singapore REIT recently did a rights issue to buy 2 indonesian hospitals.

But what astounds investors is that the information provided in the circular is comprehensive enough for you to learn more about Indonesia Healthcare industry.

Investment Moats.com have full coverage on this rights issue and if you want to read the circular online you can read it at

Why you should read First REIT’s rights offer circular if you are interested in Healthcare REITs

This article was original posted in Investment Moats. You can read the article here @ Investment Moats. Investment Moats discusses dividend investing, income strategies and high yield investing.

China Mobile is the potential high yield dividend stock for your portfolio $chl

I written extensively about dividend stocks, but seldom about ADRs. since China ADRs will be listed on the SGX, i took some effort to carry out a research on China Mobile to see if it has the potential to be a great dividend stock.

[Read China Mobile a potential international dividend aristocrat? $CHL $VOD >>]

K-Green Trust's yield may not be as high as you think

I written an article over at Investment Moats indicating my purchase of K-Green Trust. From the looks of it, it doesn't look very appealing.

From this table we approximate based on 2011 dividends per share. On current yield its 6.98%. That looks good.

However, the yields over the concession years looks like those of SGS bonds.

The yield on Senoko is 2.883% and the yield on NEWater looks close to 0.971%!

If we factor in an inflation growth of 3%, the yield goes up to 3.4%, 2.57% and 1.21%.

Even then, a total return after god know, 25 years its 24% or 65% looks really medicore.

Now this is on top of the NAV going down to zero. All in all this is starting to look like a very bad proposition.

I am gonna seriously evaluate my investments. I have sent some enquiries to K-Green. lets see how responsive their investor relations is.

This article was original posted in Investment Moats. You can read the article here @ Investment Moats