Friday, February 27, 2015

The Few Things I'm Looking At Today

The thing that I like about personal finance and the financial markets is that there is perpetually something out there that you have yet to learn.

For me, it is about Dividend ReInvestment Plans (DRIPs) or scrip dividend schemes. That is basically shares issued to you in lieu of cash dividends.

Now, what are the pros and cons of them? I've known about them before, but until Croesus Retail Trust recently announced that unitholders will now need to choose how they want to receive their dividends, I never actually have to know more about this and happily lived in ignorance.

After reading drips (oh, the pun) and drabs of information all over the web from pieces like this one and this one, I found this piece regarding dividend reinvesting the most useful for me.

Pros (compared to selectively reinvesting yourself):
- Automates your compounding (removes psychological fear to buy)
- DRIP issued units might be given at a discount
- Lower brokerage charges

Cons:
- Security to reinvest in is fixed and might be overvalued
- No control over reinvestment time
- No change in brokerage costs if you reinvest dividends at the same time as new purchases
- More straightforward, less confusing
- Creates psychological attachment
- Creation of odd lots

Weighing the pros and cons, I think I have decided that for Croesus Retail Trust, I will be choosing to receive my dividends in cold hard cash. The discount that CRT is offering to issued units is a decent 2.5% off the previous 10 day VWAP.

However, in the case of Global Investments, the discount is a whopping 10% off the 3 day VWAP. 10% is substantial to me! I need to explore if SCB can do this and what will be the effect of all the odd lots. All their lines are busy, so I'll call them later and post what I find out.

I just saw Noble go under $1. Weak quarter and lower declared dividend. I still think that it's a sinking ship for now. I'm glad that I got out when I did, and that I also managed to turn a small profit!

Hong Leong Finance reduced their dividend payout from the expected 8c to 6c, bringing their total annual DPU to 10c instead of 12c. I hope this freaks out some shareholders. I'm looking for it to retest lows before I get interested in it.

WTI Crude puked about 4% last night. We're now at the $48 handle. We are currently $5 away from the recent lows. That is not very far away at all. Smash through the recent lows and head into the $30s, we'll be seeing carnage and despair, and that is when I'll be coming in gunzablazin'!

USD soared overnight, yet precious metals remained totally unchanged in USD terms. You know what that means right?

Anyway, this was a fairly interesting February. Will be doing updates for all my monthly posts over the weekend!

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