Last Updated on October 12, 2021 by Chin Yi Xuan

Are you looking to invest for passive income in the form of consistent dividends? Then this post is for you!

In this week’s post, let’s explore several Malaysia-listed Exchange-Traded Funds (ETFs) that focus on paying investors consistent dividends.

As a focus, I’ll talk about TradePlus MSCI Asia Ex-Japan REITs Tracker, Malaysia’s 1st REIT ETF launched to provide consistent, higher-than-average dividends for investors.

In addition, I’ll also briefly discuss several other locally listed dividend ETFs as well at the end of this article.

Let’s get started!

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Why invest in ETFs instead of individual companies?

First, let’s briefly understand why one should invest in ETF instead of individual companies:

ETFs are listed in the stock market, and hence can be bought and sold just like any stocks. Since ETF tracks the performance of a basket of stocks, it presents 3 main benefits:

  • No individual company risks: Since ETF tracks a basket of stocks, a single company that is underperforming or faces regulatory issues has minimal impact on the performance of an ETF as a whole.
  • Filter for quality companies: Usually, when we say that an ETF ‘tracks a basket of stocks’, it means the ETF is tracking a specific index (eg. S&P 500, KLCI).
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    To become part of an index, listed companies will need to fulfill specific criteria.
    Hence, by design, this ensures the addition of qualified companies in an index, and the removal of unqualified companies.
  • Passive in nature: In general, investing in ETFs requires less work and commitment compared to individual stocks. Since an index already has a selection criterion in place, filtering of companies (ie. Rebalancing) is done on a consistent basis.
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    In other words, investors that invest in ETFs can take a more passive approach in their investing journey (and enjoy life) instead of having to keep up with the financials of individual companies.

Essentially, if you are busy with work and life, I highly recommend for you to check out ETFs over stocks for long-term investments.

ETF is an amazing investment choice for beginners and experienced investors alike.
ETF is an amazing investment choice for beginners and experienced investors alike.

READ MORE: Malaysian’s Guide to invest in ETF


ETF #1: TradePlus MSCI Asia Ex-Japan REITs Tracker (AXJ-REITSETF) Overview

Launched in July 2020, the TradePlus MSCI Asia Ex-Japan Reits Tracker (or AXJ-REITSETF) is Malaysia’s 1st REIT ETF. It aims to provide consistent and high dividends for investors through exposure to quality REITs:

  • AXJ-REITSETF tracks REITs that pay consistent and high dividends from the MSCI AC Asia ex-Japan IMI index.
  • In other words, when you invest in AXJ-REITSETF, you will get exposure to a basket of quality REITs from developed Asian countries (HK and SG), and emerging markets such as China, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines, Taiwan, and Thailand.
  • Dividend payout is done on a quarterly basis (ie. 4 times a year)

READ MORE: What is REIT and why invest in them?


How are the REITs selected?

The REITs from AXJ-REITSETF are selected from the MSCI AC Asia ex-Japan IMI index, an index that tracks the performance of stocks across developed and emerging markets in Asia.

There are a few filtering requirements for a REIT to be selected:

  • Offers a higher-than-average dividend yield
  • Have a consistent track record of dividend payout
Tradeplus reit tracker - reit selection
AXJ-REITSETF has strict REIT selection criteria to ensure exposure to quality REITs. (Source: TradePlus)

Furthermore, to ensure the quality REIT selection, the following REITs will also be filtered out:

  • REITs with negative growth in terms of Distribution Per Unit (DPU) over 5 years will not be included.
  • For sustainability purposes, REITs whose dividend pay-out is extremely high or negative will not be included.
  • REITs without a historical track record of consistent dividend payment will not be included as well.

Filtering is a great feature of an index. Reason being, it sets criteria to automatically include qualified companies, and remove companies that do not meet the required criteria of an index.

Simply put, when investing in an index-tracking ETF, you’ll not need to worry about one specific company (or in this case, REIT) turning bad – they’ll simply be replaced once they do not fulfill the filtering criteria.


What’s in the TradePlus MSCI Asia ex-Japan REITs Tracker?

As of August 2021, the top 10 REIT holdings within the AXJ-REITSETF are mainly Singapore REITs. This is not surprising, given that Singapore is one of the most mature REIT markets in Asia:

TradePlus REIT tracker - top 10 holdings
The top 10 AXJ-REITSETF REIT holdings are Singapore REITs (Source: TradePlus)

 

TradePlus REIT tracker - REIT exposure by country
Nearly 76% of AXJ-REITSETF’s REIT holdings are listed in Singapore. (Source: MSCI)

As for sector allocation, industrial REITs and retail REITs make up 58.1% of the overall allocation:

Tradeplus REITs Tracker ETF
Source: TradePlus

READ MORE: Introduction to Singapore REIT (SREIT) and why invest in SREIT?


Performance & Dividend Yield of TradePlus MSCI Asia ex-Japan REITs Tracker

Since AXJ-REITSETF is a newly listed ETF (July 2020), there is no historical data on the past performance of the ETF.

However, you can find the back-tested performance of its underlying index as a reference. Just remember that back-testing performance is not indicative of future performance:

TradePlus REITs tracker - price performance
The back-tested performance of the MSCI AC Asia ex-Japan IMI Index for REITs (Source: MSCI)

In my opinion, purely from the perspective of price returns (ie. Capital gains), AXJ-REITSETF is certainly not impressive. With 5-year and 10-year annualized returns of 1.66% and 7.13% respectively, this ETF is not ideal if you are specifically looking for capital growth.

That said, if you are looking for consistent high dividend payout (ie. Passive income) from your investment, AXJ-REITSETF can be a suitable choice:

 

TradePlus REITs tracker - dividend yield
The dividend yield of the MSCI AC Asia ex-Japan IMI Index for REITs (Source: MSCI)

As of September 2021, the underlying index of AXJ-REITSETF generates a dividend yield of 5.54%*, which is definitely higher than the average dividends payouts in the equity market.

In short, from my understanding of REITs, I am fairly confident that you can expect between 4 – 5% of annual dividend yield from AXJ-REITSETF.

*While it is not clearly specified in the document, I’d assume this is a rolling 12-month dividend yield


A word on the performance of dividend investing:

While approaching dividend investing, it is also helpful that you adjust your expectation to the returns of your investment.

As an example, by nature, as a real estate business, REITs generally have more moderate growth in price. Hence, you probably should not invest in REITs with the expectation of huge capital gains.

However, REITs pay stable and higher-than-average dividends, which can be attractive if you are building a passive income from your investment over the long term.

Understand your goals, and adjust your expectations accordingly.

Compounding growth of a 5% annual dividend when re-invested
Invest $12,000 annually and end up with $446,000 in 20 years.

How to invest in TradePlus MSCI Asia ex-Japan REITs Tracker? 

Investing in ETF is similar to buying/selling stocks. Below, you can find the details of this ETF:

ETF Ticker/Symbol Currency Annual Fees Min. Unit per Transaction
TradePlus MSCI Asia ex Japan REITs Tracker (AXJ-REITSETF) 0837EA MYR Management Fee: 0.50%

Trustee Fee: 0.04%

Index License Fee: 0.015%

Total: 0.555% of Net Asset Value

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You can invest in AXJ-REITSETF via stock brokers that allow access to the Bursa Malaysia stock market, such as Rakuten Trade.

Invest in TradePlus REITs Tracker through Rakuten Trade
Invest in AXJ-REITSETF through Rakuten Trade

If you do not have a brokerage account yet, consider using my Rakuten Trade referral link below and get the following when you open an account:

  • 500 Rakuten Trade (RT) points (equivalent to RM5 brokerage fee rebate!)
  • + 150 RT points when you deposit a min. of RM5,000 within 5 days
  • + 150 RT points when you transfer your shares from other brokers to Rakuten Trade
  • + 800 RT Points & a brokerage fee rebate when you place your 1st trade within 10 days after your account is activated.

Aside from that, Rakuten Trade users get +1 RT point for every RM2 brokerage paid.

Open A Rakuten Trade Account Today!


Another thing that you need to know about TradePlus MSCI Asia ex-Japan REITs Tracker

AXJ-REITSETF uses a full replication strategy to track its underlying MSCI AC Asia ex Japan IMI / Equity REITs Custom High Dividend Tilted Capped Index.

Meaning, you are getting close to perfect replication of an index with the least tracking error.

ETFs' index tracking strategies explained.
ETFs’ index-tracking strategies explained.

READ MORE: 3 different replication strategies in ETFs!


2 more Malaysia-listed ETFs that pay decent dividends

There are 2 more Malaysia-listed ETFs that pay consistent and decent dividends. That said, their past and potential dividend yield aren’t as attractive as AXJ-REITSETF, but feel free to explore further regardless!

ETF #2 MyETF MSCI Malaysia Islamic Dividend (MyETF-MMID/0824EA)

The MyETF MSCI Malaysia Islamic Dividend (MyETF-MMID) is an ETF that mirrors the performance of the MSCI Malaysia IMI Islamic High Dividend Yield 10/40 Index.

This is an index that tracks Shariah-compliant companies listed in Bursa Malaysia with higher-than-average dividend yields.

Below are the Distribution per unit (DPU) and Dividend Yield of MyETF-MMID over the 3 most recent financial years:

Financial Year (FY) Distribution Per Unit (DPU) (sen) Dividend Yield (%)
2017 2.81 2.37
2018 2.76 2.38
2019 2.96 2.57

 

READ MORE: What are distribution per unit (DPU) and dividend yield (DY)?


ETF #3 Principal FTSE ASEAN 40 Malaysia ETF (CIMBA40/0822EA)

The Principal FTSE ASEAN 40 Malaysia ETF (CIMBA40) is an ETF that mirrors the performance of the FTSE/ASEAN 40 Index.

This is an index that tracks the largest 40 companies by full market value listed on the stock exchanges of Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

Below are the Distribution per unit (DPU) and Dividend Yield of CIMBA40 over the 3 most recent financial years:

Financial Year (FY) Distribution Per Unit (DPU) (sen) Dividend Yield (%)
2019 6.85 3.59
2020 5.87 3.79
2021 6.18 3.86

 


No Money Lah’s Verdict

So, there you have it – 3 Malaysia-listed ETFs that pay consistent and decent dividends!

If you are looking to generate passive income (dividends) through your stock investments, dividend-paying ETFs is certainly an option you can consider.

I hope you find this article helpful, and if you have any questions, feel free to let me know in the comment section below!


Disclaimer:

This article is produced purely for sharing purposes and should not be taken as a buy/sell recommendation. Past return is not indicative of future performance. Please seek advice from a licensed financial planner before making any financial decisions. 

This post may contain affiliate links that afford No Money Lah a small amount of commission (and help support the blog) should you sign up through my referral link.