It has been an honor and a privilege to conduct a 5-Day Early Retirement Workshop for you.
Three months ago I wrote to Batch 42 that the Straits Times Index at 5,212 was a generational milestone, and that a rising index compresses dividend yields. Both statements have held up. Neither went far enough. The index has kept running, the leadership on SGX has shifted decisively towards growth, and the hunting ground for income investors in Singapore has narrowed to the point where your own portfolio exercise produced only twelve names.
The Index Is at a Record, But the Real Money Was Made Outside It
The STI closed at 5,801.96 on 4 September 2026, a fresh all-time high and roughly 35% above where it stood a year earlier. It returned 13.1% in the first half of 2026 alone. By any historical standard for this market, that is an exceptional run, and the banks did most of the heavy lifting inside the index.
Now look at what happened outside it. In the first half of 2026, AEM Holdings returned 512%. UMS Integration returned 132%. Nanofilm returned 113%. Frencken returned 106%. Against an STI that gained 13.1%, the semiconductor supply chain not only outperformed; it made the index look like a savings account.
Every one of those businesses is
tied to the same story: AI capital expenditure flowing into semiconductor
equipment and precision manufacturing. The market spent the first half of the
year repricing that exposure, and it repriced it hard. As of May 2026, AEM
traded at around 42 times earnings versus a historical average near 14, UMS at
around 38 times versus 16, and Frencken at around 29 times versus 11.
I want to be direct with you about what this means, because it would be dishonest to gloss over it. If you had anchored on dividend yield in January 2026, you missed all of it. None of these counters would have passed the screens we ran in class. Their yields are small or absent, their earnings are cyclical, and their current multiples price in an earnings recovery that has not fully arrived. That is a real cost of the discipline you have just learned, and pretending otherwise would insult your intelligence.
The question is what to do about
it, and my answer is nothing. You cannot build a retirement income stream out
of counters that pay you almost nothing and require you to be right about the
AI capital expenditure cycle. The market may well be correct that these
businesses earn into their multiples. It may also be wrong. Either way, the
exposure does not do the job you need done.
Singapore Is No Longer a Comfortable Market for Dividend Investors
When I started writing Tree of Prosperity, assembling an SGX portfolio yielding 6% required patience but not much cleverness. Dozens of counters with decent balance sheets paid above 5%. That is no longer true, and I think you should hear it plainly rather than discover it slowly.
The banks' re-rating is the
clearest illustration. OCBC sits in your portfolio at $24.61, yielding 3.84%.
That is a good business, well-capitalized, with room to continue returning capital.
It also pays you less than 4% now, even though the same franchise yielded well
above 5% not long ago. The market has repriced quality income upward. What
remains cheap on a yield basis is, more often than not, cheap for a reason.
This is the structural shift.
Singapore equities have become a market where good income is expensive and cheap
income is fragile. The gap in between is where your work has to happen now, and
it takes more effort than it used to.
REITs Remain the Exception, and That Is Where the Bargains Are
While the STI was setting records, the FTSE ST All-Share REIT Index fell 8.2% over 2026 to early September. The two moved in opposite directions, and that divergence is the single most useful fact in this letter.
The iEdge S-REIT Index now offers an average distribution yield of 6.3% to 6.4%. The sector trades at roughly 0.86 times price-to-net-asset value, a 14% discount to stated book value. With the 6-month T-bill at about 1.70%, the yield spread is close to 460 basis points. Historically, spreads above 400 basis points have been attractive entry points for investors who can tolerate the associated volatility.
The weakness is driven by rates,
not operations. Markets are pricing at least one more Federal Reserve hike by
the end of 2026, and the Singapore 10-year government bond yield has risen
about 0.53 percentage points over the past year to 2.38%. Rates are the weather
that REITs live in, and the forecast turned hostile.
What did not turn hostile is the cash. Most S-REITs grew distributions year on year in the first half of 2026, with several posting double-digit gains. Keppel DC REIT and OUE REIT both posted double-digit DPU growth. Prices fell while distributions rose. That combination is precisely what expands the yield available to a buyer, and it is why REITs occupy five of the twelve slots in your portfolio.
Three checks before you add to
any REIT position. First, the proportion of debt that is fixed rather than
floating, because a REIT with 70% fixed-rate debt is insulated in a way that
one with 70% floating exposure is not. Second, the interest coverage ratio and
gearing indicate whether the distribution can survive a hostile
refinancing. Third, whether the discount to book is a mispricing or a judgment
about the book itself. A REIT at 0.7 times NAV because the market disbelieves
the valuation is not a bargain; it is a disagreement you have to win.
Why Your Final Portfolio Has Only Twelve Stocks
You made a batch decision I want to put on the record, because it was more rigorous than what I usually see.
You set a portfolio yield target
above 6%, and then refused to reach it the easy way.
The easy way was Deep Value. Every screen we ran surfaced counters trading below net cash. Anchun International at 30.5 cents against roughly 67 cents of cash and short-term deposits per share. Fuxing China at three to four times earnings and 0.13 to 0.16 times book, among the statistically cheapest names on SGX. HL Global, where cash per share exceeds the share price. Asia Enterprises, Nippecraft, Koyo, VibroPower. On a spreadsheet, these are the cheapest things in the market.
You eliminated all of them, and your rejection notes were consistent: severe illiquidity, controlling-shareholder influence, no formal dividend policy, and earnings that were project-driven, one-off, or negative. The line one of you wrote on Anchun was the sharpest thing produced in the whole exercise. You are paying 30.5 cents for something holding roughly 67 cents of cash per share, but you need management to eventually unlock it, and cheap can stay cheap for a very long time.
Cutting the Deep Value bucket removed most of the high-yield candidates in one stroke. Twelve counters survived, with a projected portfolio yield of 6.21%. The five-year backtest on that basket returns 19.91% annualized with a standard deviation of 12.02%, a Sharpe ratio of 1.41 against a 3% risk-free rate, and a maximum drawdown of 12.21% in October 2023. Those are respectable numbers for a portfolio built to pay you, not to beat an index.
Twelve is fewer names than I
would normally want. Be honest with yourself about what that means: with twelve
holdings, a single suspended distribution costs you roughly 8% of your income.
The mitigation is that your cash flows come from genuinely different places,
including banking, suburban retail, healthcare property, data centers, fiber
infrastructure, energy, steel, regional beverages, and two Hong Kong listings.
Diversification is about the drivers, not the count. Even so, treat twelve as a
starting point. Add names as your capital grows and as your watchlist throws up
better entry yields.
Putting It Together
Batch 43 enters a market where the exciting money is in counters that do not pay you, and the counters that do pay you have been marked down because of the interest rate cycle. That is an uncomfortable position for a new dividend investor, and I would rather you understood it now than felt it later.
On the evidence, it is also a reasonable time to buy income. A sector yielding 6.3% at a 14% discount to book, with distributions still growing, is not a market that hates your strategy. It is a market that has temporarily marked it down.
The framework you learned holds.
Buy businesses with durable earnings and a record of returning cash. Buy them
when the yield is attractive relative to the alternatives. Check that the
balance sheet can survive a bad refinancing. Spread the income across sectors
so that no single rate decision can break it. Review the portfolio thoughtfully,
not obsessively.
Persist
The hardest part of this journey is not the analysis. It is the first few years, when the dividends are small next to your salary, and the compounding has not yet become visible. A $200,000 portfolio at 6.21% pays about $12,400 a year, or a little over $1,000 a month. That does not replace an income. It buys your groceries. It is still the beginning of what will eventually replace your income.
You will also be tempted, repeatedly, by the AEMs of the next few years. Someone in your circle will have made 500% while you collected 6%, and they will mention it. Hold two facts in your head when that happens. Their return is unrealized until they sell, and you have no idea what they did with the other 90% of their capital. Your portfolio is built to pay you whether the AI cycle continues or breaks, and that is a different objective, not an inferior one.
Measure yourself against your income, not against the index. Count the dividends received this year against the dividends received last year. That number is the one that determines when you can stop working, and it is the only scoreboard that has ever mattered in this course.
Keep buying. Keep reading the annual reports. Keep the watchlist current and the cash ready for the days when the market offers you a better entry yield than it does today. Those days come around more often than you would think.
I am proud of the work every one of you put into Batch 43, and the Day 5 portfolio was among the most disciplined I have seen. I look forward to hearing where your journeys take you. As always, my door remains open.
Good luck, and invest wisely.
Christopher Ng Wai Chung
Tree of Prosperity
19 September 2026
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