How to get 5% p.a.^ dividend income as a passive investor (for the first 2 years based on the ETF’s Issue Price) (Lion-OCBC Securities APAC Financials Dividend Plus ETF review)

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Singapore investors emotion dividends.

Whether you are a young investor increasing your wealth, aliases a retiree looking for status income, it’s ne'er excessively precocious to commencement investing for dividend yield.

How to diversify your dividend income sources arsenic a passive investor?

Let’s opportunity you’re a Singapore investor – looking to put for dividend output today. 

What are nan options available?

A communal attack would beryllium to prime a mates of Singapore blue-chip dividend stocks / REITs. For instance, DBS, OCBC, CapitaLand Ascendas REIT, CICT.2

The problem pinch this Singapore centric approach:

  1. Single banal consequence – Eg. If CICT2 has an net miss
  2. Singapore vulnerability consequence – if Singapore doesn’t do good successful definite economical cycles, this portfolio will person problems

An replacement is to go an progressive investor.

This requires clip and expertise to analyse nan stocks you buy, arsenic good arsenic erstwhile to waste and rebalance your portfolio.

For investors who don’t person nan clip aliases inclination to actively show your ain portfolio, a bully action to see is investing successful ETFs. 

What astir nan world’s first APAC Financials ETF?

I was excited to study that Lion Global Investors and OCBC Securities would beryllium collaborating to motorboat nan world’s first ETF focused connected financials assemblage crossed Asia Pacific – that pays a minimum dividend output of 5% p.a.1 of nan ETF’s Issue Price for nan first 2 years.

Disclosure: This station is sponsored by Lion Global Investors and OCBC Securities. All views and opinions expressed successful this station are from Financial Horse.

Lion-OCBC Securities APAC Financials Dividend Plus ETF – minimum 5% p.a.1 dividend output for first 2 years (of nan ETF’s rumor price)

The afloat explanation of Lion-OCBC Securities APAC Financials Dividend Plus ETF is below.

But to sum up, this ETF:

  1. Provides entree to 30 of nan largest and astir tradable financial institutions3 successful Asia Pacific (including Singapore)
  2. Pays a minimum dividend of 5% p.a.1 for nan first 2 years (of nan ETF’s rumor price)

“The Lion-OCBC Securities APAC Financials Dividend Plus ETF is nan world’s first APAC Financials ETF, riding connected APAC’s financial strengths while providing investors pinch unchangeable dividends.1

The finance nonsubjective of nan Fund is to replicate arsenic intimately arsenic possible, earlier expenses, nan capacity of nan iEdge APAC Financials Dividend Plus Index utilizing a nonstop finance argumentation of investing successful all, aliases substantially all, of nan underlying Index Securities.

The Index is compiled and calculated by Singapore Exchange Limited.

The Index intends to way nan 30 largest and astir tradable companies listed successful Asia Pacific and is designed to supply entree to unchangeable dividend payout attributes and maturation successful nan financials sector.”

Asset Allocation for iEdge APAC Financials Dividend Plus Index

I’ve extracted their plus allocation beneath (as of 31 March 2024).

The apical 5 countries are:

  1. Japan (20.6%)
  2. Singapore (20.4%)
  3. Australia (19.8%)
  4. Hong Kong (19.1%)
  5. South Korea (16.3%)

Collectively, these countries dress up almost 96% of nan Index.

You tin spot nan apical 5 holdings2 arsenic good (as of 31 March 2024):

  1. DBS Bank (7%)
  2. OCBC Bank (7%)
  3. UOB Bank (6%)
  4. KB Financial Group – South Korean Bank (6%)
  5. Sumitomo Mitsui Financial Group – Japanese Bank (6%)

The Index gives you vulnerability to nan acquainted DBS, OCBC and UOB bank2 for nan dividend yield, but besides includes nan Japan, Australia, Korea, Hong Kong, Malaysia, Indonesia and Thailand financials assemblage to diversify nan Singapore exposure.

Returns for iEdge APAC Index

The Lion-OCBC Securities APAC Financials Dividend Plus ETF tracks nan iEdge APAC Financials Dividend Plus Index.

Between 2 February 2024 (index motorboat date) and 31 March 2024, we person seen nan Index return 8.0%7, outperforming Straits Times Index’s 1.9% and iEdge S-REIT Leaders Index’s -3.3%.

This handily outperforms some nan STI Index and nan REIT index7 (although to beryllium adjacent nan REITs person been punished because of higher liking rates, while banks person been doing good for that nonstop reason).

Do statement that this is simply a very mini model of conscionable 2 months (given nan scale was only launched connected 2 February 2024), truthful I do be aware against extrapolating that 8% return into nan future.

What I for illustration astir nan Lion-OCBC Securities APAC Financials Dividend Plus ETF

Simple fuss free vulnerability to Asia Pacific’s largest and astir tradable financial institutions3

I for illustration that this ETF gives you a elemental solution – you tin entree a handbasket of nan largest and astir tradable financial institutions3 crossed Asia Pacific.

As a unit investor, if I were to bargain nan banks today, I would astir apt spell for a mates of nan section banks, DBS Bank and OCBC Bank2, and possibly a mates of China banks listed successful Hong Kong.

The chance of maine going retired of my measurement to bargain an Australian, Korean aliases Japanese bank, is frankly rather low.

And this ETF solves that.

If you are bullish connected financial institutions, and you want to put successful them but not beryllium overexposed to Singapore.

I deliberation this is simply a awesome action – and it’s nan world’s first ETF focused connected Asia Pacific Financial Institutions3.

The ETF focuses connected value financial institutions3, truthful you get perchance much unchangeable dividend income1. Not only do you get nan biggest financial institutions3 successful Singapore, you besides get entree to apical financial institutions3 and banks successful Australia, Malaysia, South Korea, Japan, Hong Kong, Indonesia and Thailand .

For instance, National Australia Bank2 is Australia’s apical business lender pinch 21.7% marketplace stock successful FY 20237. (Source: National Australia Bank Full Year Results 2023)

Minimum dividend output of 5% p.a.1 (of nan ETF’s rumor price, for nan first 2 years)

The scale itself has a nett dividend output of 5.91% p.a.7 arsenic of 31 March 2024 (Source: Bloomberg).

This will of course, up and down complete clip if nan financial institutions3 themselves raise aliases trim dividend yields.

However, nan ETF has committed to a minimum dividend output of 5.0% p.a.1 (of nan ETF’s rumor price) for nan first 2 years.

How sustainable is nan intended 5% dividend yield1? (after nan first 2 years)

I conjecture nan mobility is really sustainable nan intended 5% dividend yield1 is, aft nan first 2 years. 

As of 31 March 2024, nan existent nett dividend output for nan underlying scale is 5.91%7.

But what if we get liking complaint cuts, aliases an economical slowdown, specified that nan banks themselves trim dividends?

Well I suppose if you conscionable bought DBS / UOB / OCBC bank2 straight you would person nan aforesaid problem.

The use pinch buying via nan ETF is that location is geographical diversification.

So for example, successful nan arena nan Singapore banks trim dividends, nan Hong Kong listed and Japan banks whitethorn beryllium capable to support / summation their dividends (because they are astatine a different constituent successful their liking complaint cycle), allowing you to support nan 5% dividend yield1.

Financial Services is among nan world’s astir profitable sectors

The ETF besides gives you vulnerability to nan financial assemblage generally, which not only includes banks, but besides finance management, security and brokerages & exchanges.

Insurance companies successful peculiar are an progressively high-growth industry, and location are powerful diversification benefits (vs conscionable buying DBS/ OCBC / UOB bank)2.

Potential Risks of Lion-OCBC Securities APAC Financials Dividend Plus ETF

Exposure to liking complaint risk?

The biggest consequence that jumps retired astatine maine pinch buying an ETF chiefly focused connected nan financial assemblage would astir apt beryllium liking complaint risk.

Yes, banks person done good nan past fewer years because of higher liking rates.

But if we spot US liking complaint cuts going guardant – will this lead to underperformance for nan banks?

The redeeming grace is that because nan ETF invests successful nan crossed nan Asia Pacific region, it gives you a batch of diversification from an liking complaint rhythm perspective.

For example, nan Japanese cardinal slope is projected to raise liking rates going forward, alternatively of cutting.

Whereas for China (which nan Hong Kong listed Financial Institutions whitethorn person vulnerability to), nan cardinal slope has already been cutting liking rates since 2021.

So this ETF allows you to diversify, alternatively of conscionable investing successful Singapore wherever we are very tied to nan US liking complaint cycle.

Geographical exposure

The different consequence is vulnerability to Hong Kong listed banks – specified arsenic China Construction Bank and ICBC2.

China banks listed successful Hong Kong specified arsenic ICBC2 connection very charismatic 8% dividend yields today7 (Source: Morningstar arsenic astatine 22 April 2024), which helps bring nan dividend output of nan ETF up.

At nan aforesaid time, not each investor is comfortable pinch vulnerability fixed nan subdued economical maturation and anemic spot sector, truthful it depends connected your individual consequence appetite (Source: SGX Index Edge arsenic of 31 March 2024). 

Fees and Dividend argumentation of Lion-OCBC Securities APAC Financials Dividend Plus ETF

The guidance fees are astatine 0.50% per annum, which is mostly successful statement pinch Singapore ETFs.

Dividends are quarterly, paid successful March, June, September, and December.

As shared above, nan money intends to person 5% p.a.1 dividend output of nan ETF’s Issue Price for nan first 2 years. 

From twelvemonth 3 onwards, nan ETF intends to state quarterly distributions of astir 5% p.a.*1 (of nan ETF’s rumor price).

*Distributions are not guaranteed and are taxable astatine each times to nan money manager’s discretion

Can you put successful this ETF utilizing CPFIS aliases SRS funds?

CPFIS is not disposable for Lion-OCBC Securities APAC Financials Dividend Plus ETF arsenic this is simply a caller ETF.

You tin usage SRS costs to acquisition nan ETF.

Will I bargain Lion-OCBC Securities APAC Financials Dividend Plus ETF?

The measurement I spot it, it’s very difficult to replicate an plus allocation for illustration this connected your ain – pinch vulnerability to financial sectors successful Singapore, Malaysia, Japan, Australia, Korea, Hong Kong, Thailand and Indonesia.

Realistically, astir of america would conscionable bargain DBS Bank / OCBC Bank aliases possibly UOB Bank2 and telephone it a day.

That’s a batch of attraction consequence successful Singapore.

Sure Singapore banks are doing good today, but will that alteration successful nan adjacent 24 months?

Who knows.

So I for illustration that this ETF gives you a elemental and fuss free measurement to get vulnerability to nan largest and astir tradable financial institutions3 crossed Asia Pacific.

For instance, Japan is connected a different liking complaint rhythm compared to Singapore, which provides powerful diversification benefits.

For passive dividend investors who don’t want to fuss pinch banal picking, and want diversification, this caller ETF is simply a very absorbing option.

How to bargain Lion-OCBC Securities APAC Financials Dividend Plus ETF?

You tin bargain Lion-OCBC Securities APAC Financials Dividend Plus ETF from your broker.

SGX Code: YLD (SGD) and YLU (USD)

Bloomberg Ticker: FINSGD SP (SGD) and FINUSD SP (USD)

ISIN: SGXC10762612

Lion-OCBC Securities APAC Financials Dividend Plus ETF

Interested to study more?

Visit Lion Global Investors aliases OCBC Securities to find retired more.

  • Lion-OCBC Securities APAC Financials Dividend Plus ETF
  • Lion-OCBC Securities APAC Financials Dividend Plus ETF (lionglobalinvestors.com)

1, ^ As group retired successful nan prospectus, distribution payments shall, astatine nan sole discretion of nan Manager, beryllium made retired of either (a) distributable income; aliases (b) superior gains; aliases (c) superior of nan Deposited Property aliases a operation of (a) and/or (b) and/or (c). Distributions are not guaranteed and whitethorn fluctuate. Past performance, yields, and payments are not needfully suggestive of early aliases apt performance, yields, and payments. Distribution payouts and its wave mightiness beryllium changed astatine nan Manager’s discretion and tin beryllium made retired of distributable income, superior aliases both. Any costs of distributions by nan money whitethorn consequence successful an contiguous simplification of nan nett plus worth per share/unit. The Fund seeks to put each aliases substantially each of nan Fund’s assets successful Index Securities successful substantially nan aforesaid weightings arsenic reflected successful nan Index. Please mention to nan money prospectus for much accusation connected nan ETF’s distribution policy. Please mention to lionglobalinvestors.com for much accusation connected nan income disclosures.

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7 Past performance, yields and payments are not needfully suggestive of early aliases apt performance, yields and payments

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The units of nan Lion-OCBC Securities APAC Financials Dividend Plus ETF are not successful immoderate measurement sponsored, endorsed, sold aliases promoted by nan Singapore Exchange Limited (“SGX”) and/or its affiliates and SGX and/or its affiliates make nary warranty aliases practice whatsoever, expressly aliases impliedly, either arsenic to nan results to beryllium obtained from nan usage of nan iEdge APAC Financials Dividend Plus Index and/or nan fig astatine which nan iEdge APAC Financials Dividend Plus Index stands astatine immoderate peculiar clip connected immoderate peculiar time aliases otherwise. The iEdge APAC Financials Dividend Plus Index is administrated, calculated and published by SGX. SGX shall not beryllium liable (whether successful negligence aliases otherwise) to immoderate personification for immoderate correction successful nan Lion-OCBC Securities APAC Financials Dividend Plus ETF and nan iEdge APAC Financials Dividend Plus Index and shall not beryllium nether immoderate responsibility to counsel immoderate personification of immoderate correction therein.​

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