Saturday, August 27, 2016

The Search For Dividend Stocks

I have started on my research on past stock data - in order to find the criteria to "sniff" out the Dividend Stocks.

I am not talking about REITs or Business Trust or even Blue Chips. I am talking about finding the pennies that can give you hopefully at least 5% of dividend yield every year.


My initial research shows:

1. A company that constantly gives out 5% of dividend yield, most probably have a price to book ratio of more than 1. A stock that has a price to book ratio of less than 1 and also have a dividend yield of more than 5% per year, MAYBE lacking in other parts of its financials. More due diligence is required.

2. SOME stocks uses leverage to support their high dividend yield. Their debt to equity can be more than 100%. But how long can they continue to do this? The research indicates that some of the highly leverage Stocks, that gave high dividend, eventually encounter other issues.

3. Net Profit is REQUIRED constantly, even when the Stock continuously have negative net cash from operating activities. This meant that there will be a lot of non-cash items that are added to these company's net profit. These companies also seems to run into other issues later on.

4. SGX requirement/Singapore Regulation requirement state that a company REQUIRED to have retain earning to give out dividend. A company that constantly made losses are not allowed to give dividend.

5. It is VERY HARD to find a stock that constantly produce 5% of dividend yield and expects it to be constantly fundamentally strong IF it is not a Blue Chip. You will need to give up on some fundamental beliefs if you expect a penny to provide 5% dividend yield constantly.

6. Management or a subsidiary of another listed firm or a family-ran firm are BONUS contributing factors to providing a high dividend yield.

7. Do note that due to the lack of fundamental checks, any CHANGE in Dividend or Net Profit will result in a great change in the share price. Sometimes it is better to "park and hide" - Treat it like a fixed deposit.

Thus, that is all I have found out about dividend stocks for now. I have yet to know what I will do after finding out the criteria in the search for Dividend Stock. Nevertheless, I may reveal more to the attendees of the next Sharing Session with T.U.B in September 2016. Wait for the announcement!

Oh... and do remember, please like our Facebook page fr future updates - T.U.B Investing.

6 comments:

  1. Hi TUB investing,

    You can try do a reserch on these high yeid stocks and perhaps share with us your thoughts on their business.

    Small cap - ums, tai sin, captii, CDI limited, 2nd chance, PCI

    Pennines - CDW, excelpoint, avi-tech, new toyo

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    1. Hi eeming,

      Thank you for reading my blog.

      I have actually finished the dividend scorecard.

      It will be an add-on the Enhanced Triple S Scorecard.

      For a start, I want to see the accuracy of this new add-on is.

      So I will be testing against 5 stocks by using there past data in 2014.

      I will backtest and see if they will pass the scorecard. Apparently, they are supposed to pass because they gave out roughly about 5% of dividend in 2015 and 2016.

      Once I confirm the result, I will do only other stocks.

      For your list of stocks, there are just too many. Most probably I will just write about 3 to 4 of the stocks after my initial confirmation.

      You got any stock that you deem as priority?

      Regards,
      TUB

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    2. Hi Tub
      My two cents worth when you do your selection criteria for dividend stocks.
      1)Company is able to pay out dividends regardless of economic cycles which means a track of paying dividends during the 2008/09 recession
      2) EPS and FCF must be greater than the dividend paid
      3) Payout ratio less than 100%
      4) Track record of growing dividends for the past years. Hence, the stock may not have 5% yield now but because of their growing dividends, the yield on cost may be more than 5% in future.

      Augustine

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    3. Hi Augustine,

      Thanks for commenting again, as well as for your input.

      Hmm... Maybe I will explain more in the next few posts - then you will understand more of what criteria I chosen and why I chose them.

      Regards,
      TUB

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    4. Hi TUB

      Thanks for your reply. Hope you can consider loosening your 5% yield criteria as I believe a stock that consistently grow its dividends will be even better.

      Or maybe you can have both types stocks with growing dividends and stocks with 5% yield and pays consistently but may not be growing

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    5. Hi Augustine,

      Thanks for your comments once again.

      Will look into your suggestions.

      Regards,
      TUB

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