(Image source: http://sgforums.com/forums/4148/topics/448537)
Tuesday, 7 July 2015
Jardine C&C on its slide down
Just wanted to highlight to you that Jardine Cycle & Carriage is continuing its slide down, reaching below $30 per share today. Though this is still a quite expensive stock (min $3000 investment is not something all of us can just make), but as it falls it seems to keep on getting more attractive.
Monday, 6 July 2015
Good Companies vs Good Investments
This is just to clear the air and differentiate between good companies and good investments. In a nutshell, not all companies are good companies, but almost all companies can be good investments.
Good companies do not necessarily make good investment nor are good investments always good companies.
Good companies do not necessarily make good investment nor are good investments always good companies.
Saturday, 4 July 2015
UOB Kay Hian - Good Buy with Weakness in Trading Volume?
Was just looking at this lightly traded stock, which is also the only listed broker in Singapore as well. Its Singapore operations make up the largest source of revenue, followed by Hong Kong then Thailand, so it is exposed largely to South-East Asia and the more general Asian region. With the decline in trading volume in Singapore, its earnings have fallen quite a bit in 2012 and 2014, which has also dragged its share price down from $1.645 in Aug 2014 to the current ~$1.50.
(Image source: http://www.thesas.org.sg/component/content/category/8-web-pages.html)
Friday, 3 July 2015
Do The Rich Think Differently?
Going to use this blog post to share some of the knowledge I have gleaned from books such as "Rich Dad's Retire Young Retire Rich" by Robert T. Kiyosaki and "The Millionaire Next Door" by Thomas J. Stanley and William D. Danko as well as articles online and some of my own observations of how the rich think and why are it is different from the middle-class thinking.
Wednesday, 1 July 2015
Thoughts on Investing For Dividend Yields
In this blogpost, I hope to share my views on investing for dividend yields (something quite popular among other finance bloggers). I do not really subscribe to the belief that by looking at a basket of the highest dividend yield shares would yield superior results to other shares.
There are two goals in investing: Dividends or Capital Appreciation, both of which will provide your return on investment. A share paying out a 5% dividend and another whose price is growing at 5% a year is almost the same in my opinion, it is just whether the company decides to reinvest the money in itself or pay it out to its shareholders.
In my opinion, the important part which decides whether a company is better off paying out its dividends or reinvesting in itself would be the return on equity. If it is able to maintain or even grow a high return on equity (double-digit?) which is higher than my expected return on investment, I would be happy to let it keep its money for reinvestment in the business instead of paying it out in dividends. Likewise, a company that pays out a satisfactory dividend is also good.
There are stocks now that offer good dividend yields, look at Jardine Cycle & Carriage, which presents a good dividend yield for a company that is at the low end of their cycle (Read: Jardine C&C: Possible Opportunity for Dividends). These companies are good for people looking for a source of income which they can reinvest or use for their own expenses.
But there are also stocks that offer good value while paying almost no dividends. One of the stocks in this category that I'm watching is Ezion. Though is pays like 0.1 cent of dividend on a one cent share, it has a P/E ratio in the mid-single digits. While it is in the oil and gas sector which has declined considerably since its heyday, the fundamentals of the business still seem sound and even if it takes a hit to its profits, its currently low P/E ratio should be able to absorb it. I like it to not pay dividends for one key reason: It earns a high Return on Equity. around 20%. I would be hard-pressed to find another company that can return the same amount, or even if it decreased to say 10%, it's still better than the market return and the money that the company earns and reinvests in the business can also hopefully earn such a high return which would make the lack of dividends worthwhile.
Needless to say, good dividend yields and consistent payouts are good, but I don't think that we shouldn't only be looking out for shares with the highest dividend yields (these usually don't last very long anyway). We have to look at the underlying profits of the business and see if the dividends that it pays are sustainable or if the company is able to generate a satisfactory return on its equity, which can justify the retention of earnings. But I do not think that there should be a preference for a dividend-yielding stock unless maybe you're retired and looking for a passive income flow, but even then, good opportunities for capital appreciation should not be avoided.
Is a good share one that pays out its earnings in dividends?
(Image source: http://zewt.blogspot.sg/2007/09/tax-free-dividends.html)
In my opinion, the important part which decides whether a company is better off paying out its dividends or reinvesting in itself would be the return on equity. If it is able to maintain or even grow a high return on equity (double-digit?) which is higher than my expected return on investment, I would be happy to let it keep its money for reinvestment in the business instead of paying it out in dividends. Likewise, a company that pays out a satisfactory dividend is also good.
There are stocks now that offer good dividend yields, look at Jardine Cycle & Carriage, which presents a good dividend yield for a company that is at the low end of their cycle (Read: Jardine C&C: Possible Opportunity for Dividends). These companies are good for people looking for a source of income which they can reinvest or use for their own expenses.
But there are also stocks that offer good value while paying almost no dividends. One of the stocks in this category that I'm watching is Ezion. Though is pays like 0.1 cent of dividend on a one cent share, it has a P/E ratio in the mid-single digits. While it is in the oil and gas sector which has declined considerably since its heyday, the fundamentals of the business still seem sound and even if it takes a hit to its profits, its currently low P/E ratio should be able to absorb it. I like it to not pay dividends for one key reason: It earns a high Return on Equity. around 20%. I would be hard-pressed to find another company that can return the same amount, or even if it decreased to say 10%, it's still better than the market return and the money that the company earns and reinvests in the business can also hopefully earn such a high return which would make the lack of dividends worthwhile.
Needless to say, good dividend yields and consistent payouts are good, but I don't think that we shouldn't only be looking out for shares with the highest dividend yields (these usually don't last very long anyway). We have to look at the underlying profits of the business and see if the dividends that it pays are sustainable or if the company is able to generate a satisfactory return on its equity, which can justify the retention of earnings. But I do not think that there should be a preference for a dividend-yielding stock unless maybe you're retired and looking for a passive income flow, but even then, good opportunities for capital appreciation should not be avoided.
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