Differences between Reit and Business Trust

dividend-stockEvery now and then, i got question regarding to dividend stock after my post on dividend stock to be in your porfolio. With most dividend stocks fall under Reit or the Business trust model, but as an investor, do you know what is the differences between both? I got this nice article from http://www.fool.sg/2015/01/05/3-important-differences-between-a-reit-and-a-business-trust-that-investors-have-to-know/ that have a good comparison between both.

For the full list of REIT listed in Singapore, do click here, and if you interested in Business Trust listed in Singapore, please click here instead. :)

3 Important Differences Between A REIT and A Business Trust That Investors Have To Know (From fool.sg)

The Singapore stock market is home to quite a wide selection of real estate investment trusts (REITs) and business trusts. In fact, Singapore’s stock exchange is also one of the few exchanges in the world which allows the listing of business trusts.

Within Singapore’s market benchmark the Straits Times Index (SGX: ^STI), there are already three trusts amongst its 30 constituents. The trusts include Ascendas Real Estate Investment Trust (SGX: A17U), a REIT, and Hutchison Port Holdings Trust (SGX: NS8U), a business trust.

It might be easy to lump a REIT and business trust together and view them similarly. But, there are actually important differences between the two types of securities that investors have to know before they invest in them.

1. Legal structure

Unlike a normal corporation, both business trusts and REITs are managed through a trust deed with the trustee having full legal ownership of the trust’s assets instead of the trust’s unitholders.

The trustee of a business trust is considered the trustee-manager and so it’s the same entity which owns and manages the assets on behalf of the unitholders of the business trust. Meanwhile, a REIT requires a trustee to hold the assets and a separate manager to manage the assets for unitholders. The trustee for a REIT must be a licensed entity approved by the authorities.

Unitholders can also choose to remove the manager of a REIT if there’s a vote on the matter and more than 50% of the votes say “yes” on the move. As for a trustee-manager of a business trust, it can only be removed if 75% of votes from unitholders are in favour of such a move.

2. Differences in leverage

According to the “Code on Collective Investment Schemes,” a REIT is only allowed a limit of 35% for its gearing ratio. A REIT can boost its gearing ratio to 60% if it obtains a credit rating from rating agencies (these credit restrictions might be altered in the future).

Business trusts on the other hand, are not required to subject themselves to any borrowing limit. It is thus important for unitholders to keep an eye on the gearing ratio of a business trust as the level of leverage employed might get out of hand. There have been instances of business trusts overstretching themselves, with the experience of First Ship Lease Trust (SGX: D8DU) being a good example.

In this sense, business trusts might be seen to be riskier entities than a REIT since there’re no hard limits on how much the former group can borrow.

3.  The level of distributions

Another key difference between a business trust and a REIT is that the former is is not obligated to distribute any of its income while a REIT must pay out 90% of its “distributable income” under the Income Tax Act. So for investors looking for stable yields, a REIT might be considered a “safer” investment in this sense since a REIT has to pay a distribution.

Foolish Summary

A collection of real estate might be bundled up as a business trust instead of a REIT – there are no restrictions on the matter. But, an investor has to realise that, there are fundamental differences between the two structures even if they do own the same type of asset. Investors should take note about these key issues before investing in any of the two.

Dividend Stock as part of Your Investment Plan

dividend-stockIn this article, i shall discuss on my favorite type of stock which is dividend stock, and why i love to have these darling in my Investment Portfolio!

Type of Stocks

I will broadly classified stocks namely as the following:

-Capital Appreciation Stock (time frame of Mild to Long term holding)

Capital appreciation (CA) is the increase in the value of an investment/trading that you make. You will get CA when you get a profit of the difference between the purchase and sale price of the stock and less of the purchase and sale commission costs.

It may required a time frame from months to years of stock holding before you gain from a decent CA. And of course, it will required some commitment from you to get the education on certain skillset, experience and monetary strength in order to pick the winning stock.

-Dividend Stock (time frame of Mild to Long term holding)

Some corporate has the history to distribute their earnings to company shareholders in the form of Dividend. It could take place as Stock or Cash distribution form (Dividend yield). And do take note, that some company distribute Dividend on a regularly basis (quarterly), while some only take place once in every two years or longer. Please do your research on their distribution interval.

On general, such stock will required from months to years holding, since investor are focused on the regular Dividend.
-Penny Stock (time frame of Short to Mild term holding)

Penny Stocks are what we label as the Small-capitalization equity shares. There are plenty different way of how investor/trader classified penny stock. Some based on their total value of stock shares market capitalization whiles other just on their per share values. For me, i just take those that being trading below twenty cents as Penny Stock.

As Penny Stock being priced extremely low, it make relatively easy for individual to purchase large quantities of shares with the aim of quick profit, during rapid price movements. As a result, it make Penny Stock extremely volatility and considered to be highly speculative type of stock.

 

3 Top Reasons why i love Dividend Stocks to be in my Investment Portfolio.

After discussing briefly on the different type of stocks out there, readers out there should have a better understanding of them. If you still get confused, do invest some time and effort to educate yourself over it. It’s what you do during your free time to make yourself more wealthier.

-Dividend
Dividend stock as what it name implied; to distribute in the form either Stock or Cash reward to their royal company shareholder regularly. It always better to invest in such type of stock with a good Yield than to park all your money in Bank Account or Fixed Deposit with a low interest rate. And you can bet that you be feeling happy to receive statement showing regular decent payment into your investment plan, as you are building your Big Fat Pillar!

 

payout-Stable
As most of us will be busy with our Day Job and focusing our energy and time in our Career and Family and other commitment in Life, we may not have enough time to keep a lookout for our Investment Portfolio everyday, unless you got a reliable Personal Stock broker. Dividend stock will be the perfect solution for that. Reason being that those royal company shareholder tend to be long term investors, and you can expecting much lower volatility, lower stock price swing. Besides that, they tend to be more stable than other type of stocks especially when in time of uncertainly in stock market due to their dividend nature that cushion the fall.

 

CA-Capital Appreciation

Another main reason why i consider them as darling for any investor, there is a high probability  of Capital appreciation (CA) over the years during the Stock Market Bull period. History has proven it and it will just repeat again in the future.

 

 

 

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Disclaimer
:

All analysis are based on my own personal point of view and experience and it should not be used as a decision to solicit buy/sell activity.

And purpose of this article is written in mind for main purpose of knowledge sharing & discussion, never to induce or promote any insider trading or manipulation activities.

The owner will not be liable for any errors or omissions in this information nor for the availability of this information.

The owner will not be liable for any losses, injuries, or damages from the display or use of this information.

Sheng Siong – a good dividend stock?

Sheng Siong – a good dividend stock?

I’m a great fan of dividend stock, especially those with sound business model and in the right industry( Example, with recurring business). Two weeks ago, i enter into this trade @ $0.62 and i re-enter Sheng Siong today @ $0.665, which i using Average Up method instead of Average Down. And i shall talk more about this Average up method in the future.

The uptrend of this stock still look promising with a support line @ $0.58, and a dividend yield of 3.910%(2013), 4.135%(2012), 2.662%(2011). The stock looks like it being consolidated for 6 months, and let see if it shall provided the boast for it to break $0.690 in the coming months to come.

shengsiong-150714

Company Background

The Company was incorporated in Singapore on 10 November 2010 under the name of Sheng Siong Group Pte Ltd. The Company changed its name to Sheng Siong Group Ltd on 4 July 2011 in connection with its conversion to a public company limited. The Group comprises the Company and its subsidiaries, SS Supermarket, CMM Marketing and SS Malaysia.

The Group is principally engaged in operating the Sheng Siong groceries chain. Its stores are primarily located in retail locations in the heartlands of Singapore, and designed to provide customers with both “wet and dry” shopping options, including a wide assortment of live, fresh and chilled produce, such as seafood, meat and vegetables, in addition to processed, packaged and/or preserved food products as well as general merchandise such as toiletries and essential household products. The Group has also developed a selection of housebrands to offer customers quality alternatives to national brands at substantial savings. To support its retail operations, the Group also has an extensive distribution network, food-processing facilities, and warehousing facilities. In May 2011, the Group completed construction of its new corporate headquarters and warehousing and distribution centre at Mandai Link.

(Data from http://www.shareinvestor.com)

 

Disclaimer:

All analysis are based on my own personal point of view and experience and it should not be used as a decision to solicit buy/sell activity.

And purpose of this article is written in mind for main purpose of knowledge sharing & discussion, never to induce or promote any insider trading or manipulation activities.

The owner will not be liable for any errors or omissions in this information nor for the availability of this information.

The owner will not be liable for any losses, injuries, or damages from the display or use of this information.