The Phillip SING Income ETF fully replicates the Morningstar Singapore Yield Focus Index, which had an annualized total return of 9.6% over a 13-year period. (Data: Morningstar, June 2005 to August 2018)
Investors can be lulled into a false sense of security by stocks with high dividend yields. It is therefore important to check that such yields are not, in fact, reflecting market pricing for a weak business or for financial distress (share price denominator has been sold down).
The Phillip SING Income ETF offers a convenient way of avoiding the dividend trap by replicating the Morningstar® Singapore Yield Focus Index which selects and weights 30 constituent stocks using 12 factors associated with superior business quality, financial health, and dividend yield.
The factors include trailing 12-month return on assets, earnings yield, sales yield, book value yield, equity volatility, maximum drawdown, total revenue, market cap, enterprise value, and average daily volume.
When back-tested over a 13-year period which included the 2008 global financial crisis, the index showed an impressive annualized total return of 9.6%. The total return comprised of 4.4% dividend returns and 5.2% capital gains.
The ETF has a management fee of 0.4% and distributes dividends semi-annually. It is open for IPO subscription from 1 to 19 October at S$1 per unit and will start trading on SGX from 29 October.
Photos by Sim Kih
Data: Bloomberg, Phillip Capital Management estimates as at 31 August 2018
The table above shows that over the recent past 13 years, the ETF's underlying index (up 234%) outperformed the Straits Times Index (up 114%) by more than double, and has a better risk-return profile compared to the Morningstar Singapore, STI, and MSCI Singapore baskets of blue chips.
Large cap liquid Singapore stocks are a good representation of high yield stocks as the Singapore market places great emphasis on dividends. The dividend yield of STI constituent stocks is higher than for equity market barometer indices for the developed stock markets in the U.S. and Japan as well as for ASEAN countries such as Malaysia, Indonesia, the Philippines, or Thailand.
Many of our clients who show up at the business trust or bondholders meetings are retirees. They are our old guards. It is our mission to provide something better for the pioneer generation. We think the Phillip SING Income ETF is the solution.
- Jeffrey Lee
Managing Director & Chief Investment Officer
Phillip Capital Management
“The Phillip SING Income ETF is unique as the constituent securities of the initial portfolio of the index offers dividend yield in excess of 4% per annum, a significant yield advantage to long-term Singapore Government Bonds,” said Mr. Jeffrey Lee, Managing Director and Chief Investment Officer of Phillip Capital Management.
“The companies in the portfolio are familiar names that provide essential products and services such as supermarkets, healthcare, defense, real estate, banking, and telecommunication services.
“While the ETF aims to provide investors with regular dividend income, it does not sacrifice capital growth potential as its combined constituents have a good history of growing earnings.”
| No need to constantly monitor
There are investors whose primary investment decision-making process is to ask friends for advice or simply look up the Internet as though he is looking at a user review. It is scary that the amount of attention paid to his investment decision-making is the same as when he buys a T-shirt.
What I've heard from investors is, "I invested my entire life savings into a bond because bonds are safer than equities and therefore I will never make a loss".
In reality, that single bond risk can wipe out one's entire investment.
As fiduciaries of client wealth, Phillip Capital Management wants to provide solutions that allow investors to diversify their portfolio. Most of us, like myself, would find it difficult to monitor a diversified basket of 30 stocks.
The Phillip SING Income ETF is designed for people like me with a short attention span. There are people who have an Excel spreadsheet of their investments and monitor that all the time. I am the type who prefers to 'Buy and forget.' I prefer to put my money away in a strategy that I believe in and hopefully collect a cheque at the end of 6 months.
- Linus Lim
Director and Co-CIO
Phillip Capital Management