Last Updated on April 17, 2023 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.
Before this, here are some posts that you might find useful:
- Best China ETFs in Malaysia
- Guide: Invest in Singapore REIT ETF for consistent dividends!
- Malaysians Guide to ETF Investing!
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Table of Contents
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.
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
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:
As for sector allocation, industrial REITs and retail REITs make up 58.1% of the overall allocation:
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:
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:
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.
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.
Rakuten Trade Referral Link for New Users
If you are keen to open a Rakuten Trade account, consider using my referral link below! For that, you’ll get:
- 1000 Rakuten Trade (RT) points worth RM10 to offset your brokerage fee.
- + 150 RT points when you deposit a min. of RM1,000 within 5 days.
- + 1000 RT points when you transfer your shares from other brokers to Rakuten Trade.
- + 1x brokerage fee rebate when you place your 1st trade within 30 days after your account is activated.
Aside from that, Rakuten Trade users get +1 RT point for every RM1 brokerage paid! Click HERE for the full T&C on RT points.
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.
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.
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Chin Yi Xuan
Hi there! I am Yi Xuan. I am a writer, personal finance & REIT enthusiast, and a developing trader with the goal to become a full-time funded trader. Every week, I write about my personal learnings & discovery about life, money, and the market.
Hi Yi Xuan,
Thanks for your sharing, great information. I always respect those who really love to share their knowledge and experience.
May I know which ETFs are recommended for capital gain? And which USA ETFs are suitable for Malaysian if I am looking for capital gain especially with accumulate type of funds.
Thank you.
Hi James!
Thanks for your comment and glad that you found it useful!
As for your question, I think there are many ETFs that you can invest in for capital gains: from the more volatile ARK ETFs to the more stable S&P500 ETFs.
I think you gotta ask yourself what’s the kind of risk and volatility that you are willing to stomach in your investing journey. For starter, I’d recommend checking out the S&P500 ETF. It has produced gains 76% of the time over the past 30 years and have withstood the test of time and crises.
Check out my full S&P500 ETF guide here: https://nomoneylah.com/2021/12/14/invest-in-sp500-index/
Hope this is helpful!
Yi Xuan
Hi Yi Xuan, hope you can help me out here. I’m retiring end of this month & was checking on high dividend stocks for passive income using my EPF savings. But I see S- Reits & even the AXJ-REITSETF dividend yield at ~ 5.5% . Wouldn’t it be better I just keep my EPF and use the annual dividend which average of 6% or more some years.? Appreciate your response.
Hi Saravanan,
In my opinion, EPF is definitely the most reliable option for your scenario. In addition, as a retiree you have full access your EPF funds so I can’t think of other options that is better than EPF at this stage.
Regards,
Yi Xuan