Author Topic: Income Portfolio Question  (Read 10888 times)

Snakepit

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Income Portfolio Question
« on: January 21, 2014, 08:04:17 am »
If I buy property shares like Redefine or any other reits type share that pay out quarterly "dividends", will the payout be seen as dividends or does the payout not fall in the category as dividends?
I want to create an income portfolio. I am not so interested in growth as I am in getting regular income.

Guys I am not so clued up on all the shares so give me advice. I am all ears.

Moonraker

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Re: Income Portfolio Question
« Reply #1 on: January 21, 2014, 12:36:47 pm »
Hi, have a peep at the posts in THIS thread.
Not aware of any ¼ly payments, Where did you see that ?

franz

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Re: Income Portfolio Question
« Reply #2 on: January 21, 2014, 02:00:04 pm »
Hi there, if you are looking for quaterly paid divis/interest you have to invest in a ETF like Satrix or DBX's.
There are also some good property ETF's to buy in to.

Snakepit

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Re: Income Portfolio Question
« Reply #3 on: January 21, 2014, 10:04:30 pm »
"Tower aims to provide investors with strong investment returns, comprising a growing income stream and capital value.
http://www.eprop.co.za/profiles/item/15501-first-sa-property-fund-to-list-under-the-new-reit-structure.html


As a Reit you have to pay out at least 75% of your distributable earnings and you can’t gear above 60% of the your loan to value," he says.
http://www.bdlive.co.za/business/property/2013/03/20/reit-structure-will-bring-clarity-increase-interest

Snakepit

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Snakepit

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Re: Income Portfolio Question
« Reply #5 on: January 21, 2014, 10:17:23 pm »
This is the statement that brings me back to my original question:
"the distributions made out to the shareholders are not actually dividends, but are income distributions"

yossarian

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Re: Income Portfolio Question
« Reply #6 on: January 21, 2014, 10:38:09 pm »
From the article that you linked:

Quote
The one negative for local investors is that for the private investor the interest exemption (currently R23,800 for individuals under 65 and R34,500 for individuals over 65) that previously applied to property loan stocks, will not be available anymore. National Treasury sees this distribution as rental income and not as interest and is currently working towards abolishing this interest exemption and looking to create specific tax-free investments.

...[snip]...

In the case of foreign shareholders of SA REITs, a dividend withholding tax will be applicable after 1 January 2014. The current rate is 15% or the applicable double tax agreement rate could apply.

I think what she is saying is that proceeds from REITS are going to be regarded as normal dividends.  The bit about "foreign shareholders" is a red herring I think.  It would be accurate if it read "shareholders."

yossarian

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Re: Income Portfolio Question
« Reply #7 on: January 21, 2014, 10:49:22 pm »
Code: [Select]
Assume your marginal rate is 40% and you are under 65:

Before REIT:

Ex 1
Investment 340k return 7%

Earnings:  23800
Tax: Nil

Ex 2
Investment 700k return 7%

earnings: R49000
Tax: R10080

Code: [Select]
After REIT:

Ex 1
Investment 340k return 7%

Earnings:  23800
Tax: 3570  Improvement: -3570

Ex 2
Investment 700k return 7%

earnings: R49000
Tax: R7350  Improvement: 2750

Conversion to REITs should make the companies more profitable too.
« Last Edit: January 22, 2014, 12:07:26 am by yossarian »

Moonraker

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Re: Income Portfolio Question
« Reply #8 on: January 22, 2014, 10:06:44 am »
This is the statement that brings me back to my original question:
"the distributions made out to the shareholders are not actually dividends, but are income distributions"

Hello, have you read my reply #2 (the link) ?
South African resident investors in a REIT pay normal income tax on income they receive from the REIT and capital gains tax when they dispose of their interests in the REIT. As before, even though they may be called dividends.
But if you invest in an off-shore REIT like RPL it will be regarded as a foreign dividend in ZA subject to 15% withholding tax.
(yossarian was not correct stating tax of 7350 on earnings of 49000 as he/she assumed it would be subject to 15% withholding tax).

Moonraker

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Re: Income Portfolio Question
« Reply #9 on: January 22, 2014, 12:47:57 pm »
Offshore equities likely to disappoint – expert

Read the whole article of course.

A reference to listed property ..

Quote
“So if you as an asset manager want to protect your investor against South African inflation, we would advocate significantly higher exposure to South African equities and significantly higher exposure to South African listed property,” he said.

He forecast that some of the second-tier listed property funds were likely to be the target of consolidation this year.

I partially agree, considering how hard European and US markets have run, and with the medium term
possibility of a slight strengthening of the Rand. Long term of course there is no chance of a much stronger Rand. (Just think 10, 20, 30 years back).

Snakepit

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Re: Income Portfolio Question
« Reply #10 on: January 24, 2014, 07:23:08 am »
Thanks guys. Highly appreciated.

Another question - Excluding property stocks, REITS and ETF's, what else can I buy on the JSE that would give me an income and as I stated, I am not concerned about growth? I just want income as often as possible.

Moonraker

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Re: Income Portfolio Question
« Reply #11 on: January 26, 2014, 08:50:37 am »
Thanks guys. Highly appreciated.

Another question - Excluding property stocks, REITS and ETF's, what else can I buy on the JSE that would give me an income and as I stated, I am not concerned about growth? I just want income as often as possible.
Pref. shares ? Subject to withholding tax. Yield varies. eg. SBPP = just over 7% When interest rates rise the yields will improve.

Snakepit

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Re: Income Portfolio Question
« Reply #12 on: January 28, 2014, 07:24:04 am »
Okay, another question and this one sounds nasty. What do you know about dividend stripping? As I understand it you buy shares 3 to 2 weeks before LDT and then get the divi and then hold it for 2 to 3 weeks after divi payout and sell it again.

What will the tax implications be?

Snakepit

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Re: Income Portfolio Question
« Reply #13 on: January 28, 2014, 07:30:48 am »
And while I am on the subject of dividends, with the rand going to the dogs, where can I get a list of companies on the JSE that pay their dividends in foreign currency. I found MMP that pay in dollars but I am looking for a whole list.

Orca

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Re: Income Portfolio Question
« Reply #14 on: January 28, 2014, 10:48:06 am »
Can't find a list but they must be among these.
http://www.topyields.nl/Top-dividend-yields-of-JSE.php
I started here with nothing and still have most of it left.