Key points
- These 4 funds all have dividend payout feature (up to 4% per annum for some and potentially higher than that for others)
- Dividend payouts help to buffer against short market dips and aid the investor in terms of allowing them to receive something while waiting for the long anticipated bull run to happen
- Not only are these 4 funds lowered to 0.3% sales charge, you can get S$15 worth of Capitavouchers for every S$10,000 fresh buy for three of these funds*
Despite a dip in April this year, it may come as a surprise to investors that many equity markets have not only recovered from their April lows, they are positive for the year. For example, as of 29 August, the Singapore STI is up 14.9% for the year. Asian markets remain cheap and our research shows a potential 58% upside in Asian markets in the next two years if market valuation reverts to historical mean. The problem is that many investors continue to be cautious in light of market volatility. So, is there a way to reduce such anxiety from seeing your holdings fluctuate while you wait for that potential 58% to happen? Yes, there is, and that is to receive dividends while waiting!
Get Paid While Waiting! Get the Best of Both Worlds
The 4 funds on promotion feature three Asian equity funds and one Singapore equity fund. The common feature linking these four funds is that they all pay out dividends! The three Asian equity funds pay out as much as 4% of their NAV each year while the Singapore Dividend Equity fund pays out 5% to 7% of its NAV each year (as stated in the fund's prospectus).
To an investor who has been through the volatility of markets in recent years, owning a fund which pays out dividends to you regularly even as you wait for markets to rise would be a very comforting thought. The constant receiving of dividends will also lessen the emotional impact of any short term market dips. Instead of thinking “Hey, the market just dropped 5%! Should I sell?” an investor would think “I just received $330 this month, and I will receive another similar sum (amount is derived from an example in the funds section below) next month. Let’s not worry about a temporary drop!”
Thus, an equity fund with a high dividend payout can also help an investor stay invested because he can enjoy the constant flow of dividends while waiting for the market to go into a bull run.
In addition, equity strategies that focus on dividends have demonstrated resilience historically compared to their unconstrained counterparts. As dividend-paying companies tend to be more mature, established and more importantly, profitable, a dividend focused strategy tends to be inherently more defensive. As such, the inclusion of dividend-focused equity funds also helps buffer against sentiment-driven sell offs and add a defensive tilt in the overall portfolio.
The Upside in Markets is there for patient investors
Based on 2014 estimated earnings, the price-to-earnings (PE) ratio of the Asian ex-Japan equity market is just 9.1 (data as of 29 August 2012). Just a mere reversion to its fair PE of 14.5 will mean an upside of 58.5%!
While the Singapore equity market presents less upside opportunity at 36.8% (current PE of 11.7 for 2012 earnings against fair PE of 16.0), it is well supported by economic fundamentals and accommodative government policies. This may suggest a quicker reversion for the Singapore equity market, which has been one of the best performing Asian markets year-to-date.
Chart 1: Current PE and Fair PE Comparisons
So, dividend payout funds will not only enjoy a rise in their unit prices if this market upside comes to pass, they will continue to receive dividends as well! And the dividends paid out during good times will be larger because the NAV of the fund would have risen then.
Funds On Promotion
A total of four dividend-focused equity funds will be on promotion during the month of September. All four will be sold at 0.3% during this promotional period, and three of these (Schroder Asian Equity Yield fund, Singapore Dividend Equity Fund and Eastspring Investments Asian Eqty Income Fund) will have an additional $15 worth of vouchers paid out to investors for every S$10,000 invested.
Schroder Asian Equity Yield Fund: Monthly Cash Payout of 4% per annum*
The Schroder Asian Equity Yield Fund has the most frequent dividend payouts amongst the four funds in this promotion. It aims to make monthly distributions to unit holders of at least 4% of its net asset value (NAV) per annum. For an investment amount of SGD 100,000 (and assuming no decline in NAV), this will amount to a monthly dividend of SGD 333.
The Schroder Asian Equity Yield Fund focuses on two specific themes within its dividend strategy:
- “Dividend cows” which are companies that are able to pay a sustainable level of dividends due to strong cash flows from their operations
- “Dividend growers” are companies that are growing their revenue and are looking to return part of their earnings to shareholders as dividends
During this promotional period, investors can also receive a $15 voucher for every S$10,000 fresh cash buy for this fund.
Eastspring Investments – Asian Equity Income Fund: Quarterly Dividend of 4% per annum*
The Eastspring Investments – Asian Equity Income Fund (known as Eastspring Inv Asian Eq Inc SGD ASDQ on the fundsupermart.com website) is also an Asia Pacific ex Japan equity fund. It employs a dividend overlay approach on top of its bottom up investment strategy to identify the companies with sustainable earnings and strong balance sheets. The fund also ensures its portfolio is well diversified across both country and sector breakdown.
From communications with the fund manager, the Eastspring Investments – Asian Equity Income Fund aims to deliver a 4% per annum cash payout on a quarterly basis (although this is not guaranteed). Currently, the fund distributes dividends the months of February, May, August and November.
During this promotional period, Investors can also receive a $15 voucher for every S$10,000 fresh cash buy for this fund.
First State Dividend Advantage: Long-term Track Record Speaks for Itself
With its 8 years of track record, long time investors will be familiar with the First State Dividend Advantage. For the second year running, the fund is our Recommended Fund for the Core Equity – Asia Pacific ex-Japan category. The fund has retained its recommendation due to its strong long-term track record as well as risk management capabilities.
The fund managers of First State Dividend Advantage has also guided for a 4% per annum, quarterly cash payout, though they have the discretion to pay more during good times. The dividends for the First State Dividend Advantage will be paid out during the months of January, April, July and October.
Singapore Dividend Equity Fund: Singapore-centric with Superior Performance*
Last but not least, the Singapore Dividend Equity Fund is a Singapore-centric equity fund with a dividend focus. Based on the fund’s prospectus, the fund managers intend to make quarterly cash distributions amounting to between 5% to 7% of the fund’s NAV each year. This makes it the fund with the highest dividend yield to investors amongst the four here. The fund is able to achieve this high level of dividends by investing substantially in Real Estate Investment Trusts (REITs). REITs made up the highest allocation of the fund, at 35.7% of its portfolio as of 31 July.
In addition to the fund’s dividend distribution, it has also been able to achieve capital appreciation for its investors. On a year-to-date basis, the fund returned 27.72%, far outpacing its dividend guidance, as well as other Singapore equity funds. The dividends for the Singapore Dividend Equity Fund will be paid out during the months of January, April, July and October.
During this promotional period, Investors can also receive a $15 voucher for every S$10,000 fresh cash buy for this fund.
Promotion
Benefit from the big discounts we are throwing in! Apart from slashing the sales charges to 0.3%, you also receive S$15 worth of Capitavouchers for every S$10,000 investment into Schroder Asian Equity Yield Fund, Singapore Dividend Equity Fund and Eastspring Inv Asian Eqty Income Fund!
Note: The promotion is applicable for fresh cash transactions only.
TERMS AND CONDITIONS:
1. The sales charge and voucher promotions are valid from 3 Sep 2012 to 28 Sep 2012. To be eligible for the promotions, orders must be placed before 3pm on the last day of the qualifying period.
2. Cash payments (Cheque and Internet payments) must reach us by 3pm on 5 Oct 2012. Pending cheque trades will automatically be voided after this date.
3. The sales charge promotion does not apply to transactions involving Intra Switch Buy, Regular Savings Plan (RSP) and Transfer-ins.
4. The voucher promotion applies to single fresh cash buy transactions only.
5. Investors who qualify for the promotion will be notified via email around 6 weeks after the qualifying period ends for voucher collection at Fundsupermart's office.
6. Gold/Silver account holders are eligible for the promotional sales charges or the sales charge under FSM Rewards Programme, whichever is lower.
7. Fundsupermart.com reserves the right to amend the Terms and Conditions without prior notification.
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