Month: March 2017

I have posted a flurry of property related articles of late.

First was the big one, becoming a property developer. This is a cornerstone stock for me, and after an additional purchase of stock, I will now, via my shareholding, be developing and selling one apartment per year.

Secondly came my long desired purchase of a self-storage stock. Hopefully more of this stock to come in future.

This week I wrap things up on the property side.

Renting out apartments and a UK bargain hunt.

I trimmed a few holdings of stocks that were lagging a bit on the earnings side and where I was perhaps too concentrated. I have used the proceeds to buy a variety of property stocks. One I am very excited about is called Indlu Place. This is a residential property stock, yielding over 9%, with low gearing. The kicker for me is that it pays a quarterly dividend. So far each quarter has paid a higher dividend that the quarter before. Like the self-storage stock, I like the fact that this stock is not in shopping malls or offices. I believe there will always be a demand for residential accommodation, especially in the lower income brackets where they play.

I have also been taking advantage of the currently strong currency where I live to invest in two UK property stocks and one German property stock. These stocks had all fallen quite a bit since Brexit, so I believe I have paid a fair price, some were half the price compared to a year ago. Two have the option to reinvest dividends, which I will take up in order to compound the investments.

Now to use income to plant dividend seeds

I never expected to start a property business. Investing seldom goes according to plan, which is one of the things I like about it. Circumstances, currencies and markets are always changing. When I started to feel over exposed to two stocks, which made up close to 60% of my portfolio, and they offered attractive exit prices, I decided that I wanted to convert a portion of that equity into safe income. Also selling my hotels allowed me to buy a property development stock.

However, my income needs for now have been met by the recent purchases. That is not to say I do not want or need more income, but I feel I have created a decent income stream, and can now get back to the process of creating wealth again.

I believe wealth will ultimately come from owning great stocks, the great compounders. The Coca-Cola’s, the Wal-Marts and the Unilevers. However, ideally one needs to find early versions of these stocks to achieve maximum benefit. The property stocks will buy me some more time and some income with which to find and invest in these stocks when I find them.

I currently have five or six of these potential wealth seeds in my portfolio, now it is time to accumulate some cash again, and look for the next great one, or add to my existing wealth seeds.

Conclusion

It will just take a few of these wealth seeds to come to fruition to really change my financial future. You have to be in it to win it after all, and now I can at least look forward to a quarterly dividend from my apartment tenants, they will not make me rich but will at least help keep me in the game a bit longer, and the great thing about a property stock as opposed to the physical property is that they will not call me in the middle of the night with a blocked drain! I will also sleep a little easier knowing that I have some euro and pound income trickling into Dividend Tycoon HQ, especially given recent political developments in my home country.

I hope I have inspired you to create an income stream of your own which will buy you a little more time, and help accumulate funds, to go after the really big winners. For myself I do feel that becoming a (minor) property tycoon will be a benefit in the ultimate goal of becoming a (major?) Dividend Tycoon.

 

 

 

 

My last post was about me becoming a property developer. This was possible since I sold my hotels. Becoming a property developer was the first step in my new quest to become a property tycoon, which naturally fits in very nicely with being a dividend tycoon.

While my property development company will in fact pay out a healthy dividend, they do also retain 70% of the profits for new developments, which limits the income yield compared to a pure property stock. As such I felt I also wanted some property stocks that will pay me rental income come rain or shine. The development business could be up and down depending on the economy, but a decent REIT (Real Estate Investment Trust) should pay out under all conditions.

Given the above, I was very happy to have some funds from the sale of my hotels in order to buy a stock I have had my eye on for ages. It is a self-storage REIT, called stor-age. (https://stor-age.co.za/)

Why I wanted a self-storage business?

The self-storage business has been appealing to me for some time. It looks so easy and profitable. I often drove past a fairly large one close to where I used to live. From the outside you could see lines and lines of garages. At one point I needed storage and found out that it was basically full up. What struck me however was that whenever I drove past, there was rarely any movement or activity. You might think that strange but when you consider that once a person takes out storage, the average time they leave their goods in storage is well over a year. So while perhaps a couple of people move goods in or out each day, you have a couple of hundred garages each silently generating revenue. Being garages, you do not have plumbing problems or difficult tenants. They also do not need to be upgraded every couple of years with the latest floor tiles or bathroom taps. Sounds good to me!

With this promise of easy and almost passive income you cannot blame me for wishing I owned a self-storage business. Alas the capital requirements are huge and I would not be able to raise it myself from banks, besides the fact that I do not have any actual experience in the storage business.

However, the beauty of the stock market is that you can become a part owner of some of the best businesses in the world by buying a share in the business. I have been watching this particular share since it came to the stock market in 2015. I also know them from their large sites that one can see dotted around as they have a very distinctive red color theme.

I also know them as I once visited a branch as a prospective client, in the name of stock research of course, and was very impressed by their modern and clean facilities, as well as friendly staff. It is a well managed business, and I would say is the best in this particular niche of the property business.

Now I realize that owning stock is not the same as owning a whole self-storage business myself, but it is a start, and I can think of a few good reasons for rather owning the stock:

1. I do not run it myself. I say it is an easy business, but it would still require your presence and time, you would still need to hire potentially difficult employees. Sitting at a desk looking into stocks is probably a better job.. and the only difficult employee is me..
2. There are lots of rather shabby looking self-storage businesses around. I got to pick the best run one, the most innovative one, and a business with very ambitious expansion plans.
3. I did not need to take out a large loan in order to enter the business, as one would most likely need if starting the business yourself.

I would also say that while I may have a fairly small portion of a self-storage business, I do not plan to stop here. As long as the price is reasonable I will add to my holding over time and look to re-invest the dividends back into the business. As such my stake in the business will get larger over time. I also do not plan to sell my stake even if the stock gets a little bit expensive.

My entry price was at at a dividend yield of just over 8% and the price has moved up a bit since then, but I have not completed the building of my own self-storage business yet.

Conclusion

I hope you can see from this post why I believe that you can become a dividend tycoon by owning stakes in great businesses, just like a tycoon would start any other business.

This business happens to be in the property business. My recent efforts have been aimed at property, and I now have three good businesses in the property business. In fact I have five but I will write about the new additions in a later post. I feel good about the diversification the property businesses have added on my path towards becoming a dividend tycoon, and especially like the high dividend yields they provide.

My focus is still on operating businesses, rather than property itself, but hey, everybody needs a roof over their heads, or at least a place to store their goods.