"September Slump" is Dividend Reinvestment Season

Have you heard of the "September Effect"? It’s a well-documented market anomaly where the months of August and September tend to be the weakest for stock market returns. For some of us, it could be a time of anxiety and fear of a market correction.

For dividend investors, this is period of market weakness can be the most powerful opportunity in the entire year. While others are worried about falling prices, my focus is on the steady stream of cash hitting my account. 

Market's Fear vs. My Cash Flow

A large number of blue-chip companies are paying out dividends from late August to September. I will be receiving dividends from the following companies in the 2-3 weeks to come: OCBC, DBS, UOB, CDG, MIT, MLT, CICT. 

This can set up a favorable scenario in which market sentiment is at its lowest, while my cash flow is at its highest throughout the entire year. The sea of market red becomes a supermarket sale for me to go shopping.  

My Q3 Reinvestment Watchlist 

Adding to modestly valued REITs now is a no-brainer for me. With the interest rate environment finally turning in their favor, it’s a prime opportunity to build positions in this recovering sector. My watchlist includes:

  1. Frasers Centrepoint Trust: A pure-play on resilient suburban retail malls. 
  2. Suntec REIT: A diversified portfolio of prime office and retail properties. 
  3. Mapletree Logistics Trust & Mapletree Industrial Trust : Key players in the new economy sectors of logistics and data centers. 
  4. Parkway Life REIT: A defensive giant in the healthcare space with stable, long-term leases

Beyond REITs, I am also watching a few dividend growers though their current valuations are too high for me to buy. Adding to the local banks is possible if their shares come down to more attractive levels. For example, I would be willing to buy DBS at S$46. Similarly, while SGX is a great business that consistently grows its dividend, I would be more comfortable adding at around S$15 per share.

 Reinvesting dividends into reasonably priced counters with good yields is what I will do. To me, it is a strategic move that will help to bolster my portfolio's cash flow and keep the dividend snowball rolling for years to come. 

How do you view seasonal market slumps? Are they a source of fear for you, or an opportunity to build your positions?

Disclaimer: This blog post is for entertainment purposes only and does not constitute financial advice. Please do your own due diligence. 

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