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J#40: We now have 9 investments in The Double Digit Dividends Fund & we’re adding more. But there’s one that got away.

Double Digit Dividends Fund growth mode

Great news! We just received an additional USD 1 million in Double Digit Dividends Fund’s assets under management (‘AUM’). There are three new investors from Poland, Belgium, and Singapore, respectively. Together with our initial investors from Ireland, the Isle of Man, Switzerland, Canada, and Germany, the mix of our investor base now reaches seven countries in different parts of the world.

Our AUM is USD 2.3 million since the Fund’s inception 3 months ago.  Although the AUM is small, every river begins with a rain drop. We are in growth mode.

I’m also happy to announce that the fund has invested a sizeable amount of capital in Tanzania Portland Cement (more commonly known as ‘Twiga Cement’ or ‘Twiga’) which comes to around USD 330,000. A copy of the purchase contract—not including brokerage and other miscellaneous fees—is provided below.

If you’ve been following my journals, you know that Twiga is one of my favorite stocks and was my first recommendation when I started Double Digit Dividends a year ago. Back then, you could scoop up shares for TZS1,980. With a withholding tax of 5%, that would have yielded 18.7% in dividends and you would be sitting on a capital gain of 86% to date. I hope that some of you were able to lock in those yields and capital gains.

Twiga’s historical share price graph is provided below.

My business partner, Tim Staermose, who has his boots on the ground in Tanzania has recently met with the CEO, Mr Alfonso Velez. And at the company’s recent Annual General Meeting, he confirmed that the last dividend of TZS 390 per share is sustainable. We believe this to also be the case given the huge amount of infrastructure the government is building in Tanzania, and the quality of Twiga’s management and operational excellence of the company. The dividends alone make Twiga a long-term, buy and hold. For further reading, visit Tim’s Global Value Hunter website. Here’s the direct link to this particular article.

With a current price of TZS3,600, Twiga’s current dividend yield is 10.3% net of withholding taxes.  It therefore still remains with a ‘BUY” recommendation and the Fund has accordingly taken a relatively large (USD 330 thousand dollars) position.  

How to gain access to well over 10% dividend yields from Twiga Cement

There are a few ways to obtain exposure to Twiga Cement and reap its high dividend yields. Tim runs the African Lions Fund, concentrating on undervalued blue-chip stocks in Sub-Saharan Africa. He is looking at a 5- to 10-year multiple returns on investment with dividends as icing on the cake. At the moment, approximately 14% of his fund is invested in Twiga.

If, however, you consider yourself a dividend investor and are looking for passive income from established companies­—not just in Sub-Saharan Africa, but from developed and other frontier markets elsewhere—where yields run in the double digits, then perhaps Double Digit Dividends Fund is the right fit for you.

Should you wish to participate, we accept new investments on a quarterly basis. We are just beginning our second quarter so there are two odd months to decide whether you wish to invest. The cut-off date for the next subscription is 30th September 2021 but it is best you submit the subscription forms and deposit your funds well before that as our Administrator Circle Partners require about 2 weeks to complete their client onboarding requirements. 

A third way, and I hope early readers of my journals have done so, is to purchase Twiga Cement using your own account. I wrote an 11-page Research Report about this company around this time a year ago. Feel free to download it from the Recommendations page.

Note that you will need at least a Level 1 subscription to our website, which is totally free. Also bear in mind that the prices and calculations are all accurate at the time of writing. But the report gives you an overall look at Twiga and is a great place to start if you would like to look into the stock further.

Twiga remains one of my favorite investments.  To give you an idea of how much we like Twiga Cement, Tim and I both have holdings in our personal investing accounts, Tim has bought it for his African Lions Fund investors (I am one), and now I’ve bought it for my investors.

Cumulatively, we own more than 3.2% of Twiga’s free float.

You can read more about my personal holdings in Twiga at J#37 – Stellar results from Twiga just paid for the rental of my new home by the marina.

Elsewhere, we continue to be hard at work investing in other names and I’m delighted to report that to help this process . . .

We have now completed opening an account at Interactive Brokers for The Fund

In my earlier Journal, “How going against the popular wisdom made me a FORTUNE and honed my investment process,” I discussed the lessons I’ve learned from my triple-bagger shophouse investment. Lesson #4, talks about the importance of executing and having the infrastructure to be able to execute immediately. 

We have done just that — establishing brokerage accounts with EFG Hermes <br>and Interactive Brokers  provides us access to 61 different markets.

This is a large universe of markets we can research and invest in to build our double digit dividend portfolio.  The table below provides a list of these countries.   

RegionBrokerMarket
MENAEFG HermesBahrain
MENAEFG HermesDFM/ADX
MENAEFG HermesNASDAQ Dubai
MENAEFG HermesEgypt
MENAEFG HermesKuwait (Premier Mkt)
MENAEFG HermesKuwait (Main Mkt)
MENAEFG HermesQatar
MENAEFG HermesOman
MENAEFG HermesJordan
MENAEFG HermesMorocco
MENAEFG HermesTunisia
MENAEFG HermesSaudi Arabia
SSAEFG HermesBotswana
SSAEFG HermesBRVM
SSAEFG HermesGhana
SSAEFG HermesKenya
SSAEFG HermesMalawi
SSAEFG HermesMauritius
SSAEFG HermesNamibia
SSAEFG HermesNigeria
SSAEFG HermesRwanda
SSAEFG HermesSouth Africa
SSAEFG HermesTanzania
SSAEFG HermesTunisia
SSAEFG HermesUganda
SSAEFG HermesZambia
SSAEFG HermesZimbabwe
AsiaEFG HermesBangladesh
AsiaEFG HermesPakistan
AsiaEFG HermesPhilippines
AsiaEFG HermesSri Lanka
AsiaEFG HermesVietnam
EuropeEFG HermesBulgaria
EuropeEFG HermesCroatia
EuropeEFG HermesDeveloped Europe
EuropeEFG HermesEstonia
EuropeEFG HermesGDRS
EuropeEFG HermesKazakh DRS
EuropeEFG HermesLatvia
EuropeEFG HermesLithuania
EuropeInteractive BrokersVienna
EuropeInteractive BrokersBelgium
EuropeInteractive BrokersEstonia
EuropeInteractive BrokersEuopean Union
EuropeInteractive BrokersFrance
EuropeInteractive BrokersGermany
EuropeInteractive BrokersHungary
EuropeInteractive BrokersIsrael
EuropeInteractive BrokersItaly
EuropeInteractive BrokersLatvia
EuropeInteractive BrokersNetherlands
EuropeInteractive BrokersNorway
EuropeInteractive BrokersRussia
EuropeInteractive BrokersSpain
EuropeInteractive BrokersSweden
EuropeInteractive BrokersSwitzerland
EuropeInteractive BrokersUnited Kingdom
USA/LATAMEFG HermesArgentina ADR
USA/LATAMEFG HermesCanada
USA/LATAMEFG HermesColombia ADR
USA/LATAMEFG HermesColombia
USA/LATAMEFG HermesPeru ADR
USA/LATAMEFG HermesPeru
USA/LATAMInteractive BrokersUSA
Asia/PacificEFG HermesAustralia
Asia/PacificInteractive BrokersAustralia
Asia/PacificInteractive BrokersHong Kong
Asia/PacificInteractive BrokersIndia (Indian Residents Only)
Asia/PacificInteractive BrokersJapan
Asia/PacificInteractive BrokersSingapore
Asia/PacificInteractive BrokersSouth Korea

Footnote: 

  • MENA: Middle East and North Africa
  • SSA: Sub Sahara Africa
  • LATAM: Latin America

Now, I would like now to turn to an update on another investment we’ve been working on.

NMB Bonds

The Fund has also opened a custodian account at NMB Bank, Tanzania. 

The NMB bonds that I have acquired over recent months have been transferred to the Fund on 01 July 2021.  With some patience and perseverance, I have managed to accumulate USD66,900 worth of NMB Bonds in my personal account Whilst this represents a small portion of the Fund’s AUM, it adds diversification. More importantly, with the Fund’s own custodian account, Orbit Securities can now buy more bonds directly for the Fund and participate in any Tanzanian bond issuance that passes our investment selection process.  Again, we continue to build the infrastructure for the Fund to be able to execute immediately.

An inventory of my bond purchases (in Tanzanian shillings) is provided below.  When I said, patience and perseverance, that’s because it has taken 20 purchases over the course of four months just to accumulate a USD66,900 holding!  Good things take time.  Journals #33 and #36 talked about NMB Bonds and provided the reasons for why we have been accumulating NMB bonds.

A 37% gainer with a double digit dividend - the one that got away: Steppe Cement

Steppe Cement facility in Kazakhstan

Steppe Cement (STCM in the London Stock Exchange) is a cement manufacturer based in Kazakhstan.  This recommendation was featured in our Zoom call presentation to prospective investors on 10th March 2021. Back then, it yielded 11.1% net of withholding taxes. 

Steppe Cement is no longer on our BUY list. 

The stock price has rallied from GBP37 as of 10th March to GBP51.  It currently yields 8.4% and therefore does not meet our investment mandate of a double-digit yield.  The Fund did place buy instructions with EFG Hermes but we were not able to fill our orders as Steppe’s price rallied and our orders simply chased Steppe’s price.

For those who bought on my recommendation, well done.  You were able to lock in a 11.1% yield and are now sitting on a juicy 37% capital gain made in 4 months.

Steppe Cement’s high yield was not an indication of high risk, but – just like Twiga Cement –  that the stock was cheap and undervalued by the market. This is exactly the type of investment we are looking for in Double Digit Dividends — before r.. Market realizes it. It ticked all the boxes when it got our attention.  It had:

  • A 3-year history of dividend payments, 
  • A double-digit dividend yield of 11.1%, 
  • low debt (debt-to-equity of 0.1 times), 
  • low future capital expenditure requirements (they recently upgraded their cement factory),
  • and a small (18.3%) free shareholder float — shareholder interests are therefore aligned with the majority owners’ wishes to receive a high dividend payout. 

Given the above qualities, Steppe Cement remains on our watchlist.  Should its share price again fall within our price range, with no fundamental reason for such a decline, we will be a buyer again.   

As you will note in the chart, Steppe’s shares went nowhere for more than a month after I first highlighted the company, and there as ample time to buy for anyone on the ball, who had the ‘infrastructure’ to buy already set up at the time.

Source: Marketwatch

I will have further updates on my other recommendations in the coming journal(s).

In the meantime, our Administrator, Circle Partners, is busy computing the Net Asset Valuation at the end of the fund’s first ever quarter. The fund’s portfolio diversification, performance and cost ratio shall be shared to our existing investors, and by way of another journal thereafter.

I am a big fan of metrics in my quarterly report to investors.  Some of the metrics I am planning to report to you on the Fund’s investments (weighted by investment allocation) are the portfolio’s debt levels, price to earnings, dividend payout ratios, and fx exposure.  This would give you a good feel as to the quality and risk levels of the Fund’s investments, together with how well the portfolio is diversified.