Friday, February 8, 2013

TWRREIT - Tower REIT - 6.04 sen Dividend - Ex-date 14 Feb 2013; A possible strategy for CNY ahead of General Elections

Tower REIT (TWRREIT) is one of the more solid REITs around with a dividend yield of approximately 8%. It is part of the Hong Leong Group and owns several office buildings in downtown KL with solid MNCs as tenants. Rentals are stable and increasing.

For anyone holding shares of TWRREIT at the close of 13 Feb 2013, they will be entitled to a dividend of 6.04 sen per share. On the 14th, it will be trading ex-dividend, meaning the opening reference price will be taken from the closing price on the 13th minus the dividend amount. So if it closes on the 13th at RM1.52, the opening price on the 14th will be RM1.46.

As the price chart of TWRREIT above shows, the share price consistently recovers from ex-dividend reference price adjustments. In Feb 2011, it took about 4 months to recover while in Feb 2012, it took one month. This means that in 2012, it only took one month for a shareholder to fully realize his dividend gains of about 4%. 4% for one month's waiting time is not bad.

For those interested to play on this theme, we can either buy the shares on the 13th, get the dividends, and wait for the share price to recover; or try to buy the shares at ex-dividend adjusted price on the 14th.

If we buy on the 13th, there is the pesky issue of having to manually reinvest the dividend income received. If we choose to enter on the 14th, we risk not being able to buy at the adjusted price (the market may choose to ignore Bursa's reference price).

A move into this share on the 13th (to secure the dividend) or on the 14th (at a lower ex-dividend adjusted price) may be sensible if we have money tied up in other stocks which are not moving or losing. Moving these funds into TWRREIT on the 13th or 14th may offer a higher probability of gains within 1-4 months (notwithstanding risks associated with the 13th Malaysian General Elections).

In the unfortunate event of unfavorable market developments arising from the General Elections, TWRREIT with its defensive features will probably be a good choice anyway.

Andrew Chua

1 comment:

  1. This article is mind blowing I read it and enjoyed. I always find this type of article to learn and gather knowledge.

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