Dividends and Passive Income for Jan and Feb 2013

I have been keeping a very bad record of my dividends/passive income.  But here it is so that I do not forget:

Jan 2013:  $111.80
Feb 2013:  $287.46

Main contributors were from Armour Residential REIT (ARR), GAMCO Gold and Natural Resources Trust (GGN), and Starhill Global REIT.

I have also liquidated quite a few of my stocks.  On the back of STI hitting its 5 year high, I have sold off all my holdings in Ascott REIT, Saizen REIT, LMIR, Thakral, Nam Cheong and Citigroup.

Portfolio Additions and Dividends Received

Wow!  We are already half a month into the new year and I have yet to make any new year resolutions (not that they matter, I break most of my resolutions anyway).  Have also been making some additions to my portfolio.

I bought more of The Coca Cola Company (NYSE: KO) and Cross Timbers Royalty Trust (NYSE: CRT).  Warren Buffet owns shares in Coca Cola so I guess it is a pretty safe bet.  After all, Coke is a product that is probably not going to disappear in the next few years.  The business is stable and of course, Warren Buffet owns it.  So have added a bit more of the stock into my portfolio.

Also added Cross Timbers Royalty Trust which pays a monthly dividend.  This is a bit like tabasco to one's portfolio.  Not for the faint hearted.  But the price has gone up quite a fair bit since I bought it so I am happy with the results.

Dividends I have received this month and last month include:

• $48.41 from Armour Residential REIT (another tabasco addition to my portfolio)
• $45.74 from GAMCO Gold & Natural Resources
• $4.36 from The Coca Cola Company.

Have also made some voluntary contributions into my spouse's CPF Special Account.  The CPF-SA pays a 4% interest.  The first $60,000 combined in the various CPF accounts also earns 1% additional interest. Much better than the interest rates one gets from the bank.  Of course, you are not allowed to withdraw it like a bank account.  But for the long term, it is good enough for me.

Armour Residential REIT (ARR) dividends

Received a cheque for November's dividends from Armour Residential REIT (ARR).  Total dividends was  S$45.89 after accounting for 30% withholding tax as well as handling and GST charges. ARR has been paying me monthly dividends ever since I bought it.  However, the stock has been quite volatile at times.

Investments and Dividends for November

Made quite a few investments this month.  Bought into a few stocks/REITs:

• 50,000 shares of Thakral
• 10,000 shares of LMIR
• 20,000 shares of Saizen

Dividends/passive income for November was quite okay.  Roughly $250.  Most of it were contributed by Gamco Global Gold and Natural Trust (GGN) and Armour Residential REIT (ARR). ARR is a mortgage REIT.  Both stock prices hve declined quite a fair bit but I will like to think that my strategy is one where I will diversify a bit into other stocks rather than focusing on just these two stocks.

I also bought some shares of the Coca Cola Company (KO).  

ARMOUR Residential REIT and Investing Risks

Managing Risk At ARMOUR 

Risk management at any corporation, particularly a securities firm is inevitable. This is particularly the case at ARMOUR. At ARMOUR Residential REIT, risk management is critical to successes and failures. Involved mostly in hybrid variable rate, and fixed rate of mortgage-backed securities, risk happens every day. Risk at ARMOUR is never something that is taken lightly by quality assurance managers. Risk is something that is carefully weighed, examined, and mitigated.

ARMOUR has strategic policies in place to help mitigate risk. These are firm policies committed to lowering risk and improving cash available in the event interest rates rapidly increase, or in the event a financial collapse were to occur. ARMOUR’s investment strategies also involve some risk; therefore policies are set to help protect investors from risk.

The primary risks involved with ARMOUR include risks associated with early payment, increasing interest rates, and concerns associated with ARMOUR’s ability to fund portfolios. Each of these risks are addressed below.

1. Managing prepayment risk. To assist with prepayments ARMOUR has in place a policy that allows ARMOUR to purchase mortgage securities at prices in excess of 100 cents on the dollar. This allows the company to pay top dollar prices for all securities. ARMOUR will also review delinquencies and refinancing to help address premiums traditionally associated with prepayment premiums.

2. Increasing interest rates. Interest rates are sometimes beyond the control of ARMOUR. At present ARMOUR would put into place a systematic program that would increase the cost of funding but allow asset yields to remain constant or allow them to change at a rate that remained slower than the rise in interest rates. This would allow a total decrease in net interest spread earned and accompanying potential dividends that ARMOUR would pay out. If funding costs and asset yields still resulted in a discrepancy, ARMOUR may consider selling assets at prices far lower than the original payment price to help offset costs and fees associated with high interest rates.

3. Funding portfolios. There are currently several strategies in place to protect portfolios and earnings from rising rates, including a strategy that focuses on shorter duration assets. The objective of ARMOUR’S current hedging program is to promote cash flow if rates rise, and decrease cash flow and decline in value if rates decline. ARMOUR’S goals include protecting assets and liabilities for all clients.

ARMOUR also seeks to help mortgage borrowers or homeowners pay off their loans at any time. This is a challenging task, and must take into consideration many factors including different interest rates. It is possible that a company including ARMOUR may over hedge, and under hedge. ARMOUR’s primary
goals include maintaining proper hedging that will protect against these factors and interest rate fluctuations as best as possible.

ARMOUR insists on paying out all dividends monthly and conducting all business in an honorable fashion. All business matters are handled in a transparent manner. This also contributes to the legitimacy and risk management potential of the company.

Dividends from Armour Residential REIT

Received a cheque for the dividends from Armour Residential REIT.  Based on my holdings of 500 shares, I am given $38.13.  Not a bad amount if you ask me.  Just the day before receiving this cheque, I also just banked in the cheque that I received for my investment in Gamco Global Gold and Natural Resources Trust.

3 Monthly Dividend Stocks I Am Watching Right Now

There are 3 Monthly Dividend Stocks that I am watching right now.  The reason I am watching them is simply because I am bullish on resources and also because I like the fact that this stocks pay monthly dividends.  Of course, the stocks listed here are highly risky and might not be suitable for many investors.  

1.  Gamco Global Gold and Natural Resources Trust (GGN)

Well, GGN used to be called "Gabelli..." and then there was a name change to "Gamco...".  But GGN's dividend history since 2005 has been pretty neat to me.  To invest in this stock, you need access to the US market which should be readily available through most of the brokerages in Singapore.  Do note that there is a withholding tax of 30% for foreign investors so that means you have to deduct whatever dividends you are supposed to receive by 30%.  Do add in another few dollars for the processing/admin charges and you will realise that you actually need a sizeable investment for the yield to justify itself since there are so many REITs listed in Singapore that might give a better yield.  Nevertheless, as I am bullish on resources (especially Gold), I am thus thinking of accumulating more of this stock.

2.  Armour Residential REIT

If the above stock is risky, Armour Residential REIT I believe falls into the "super don't ever touch it " kind of risky.  It is frankly speaking not a REIT like one would expect it to be.  It is a mortgage REIT so there are many risks involved associated with interest rates and stuff.  Still, it pays out a neat dividend.

3.  Enerplus Resources

After divesting my canroys when there were all the tax changes and stuff, I am starting to zoom in again on "energy plays".  Enerplus Resources is one of those stocks that still pays monthly dividends.  It is an independent North American energy company with a diversified asset base of oil and gas properties across a variety of resource plays.  The monthly dividends for this are still good though they seem to have reduced recently.

[Note: This post should not be read as an invitation/recommendation/advice to invest in the stocks listed above.  The writer is vested in both GGN and Armour Residential REIT.]

Armour Residential REIT

Have bought 500 shares of ARMOUR Residential REIT (ARR). ARR pays out US$0.10 per month in dividends. Its current share price is around US$7.00