According to French-Fama study (who won the nobel prize for economics) the number of stocks to substantially lower the portfolio risk is a minimum of 10 diversified stocks, and after 30 stocks there is no more increase risk reduction and the portfolio will tend to perform similar to index.

Diversified stocks means stocks diversified across industry with different beta to each other. 10 plantation stocks is NOT diversification.



This post has been edited by gark: Jan 21 2013, 10:52 AM

Megasale starting today until GE.. I am in hunting mode for dividend stocks also...

This post has been edited by gark: Jan 21 2013, 11:04 AM

Still look look see see, a lot of stocks is still overvalue... wait for more discount first.

The simplest way is to look generally at PE, DY and PBV values. Also look at future growth, higher growth warrants higher PE.

My own ultra-simple layman formula for reasonable PE = (Future growth% + DY%)

For dividend stocks you need to see DY%, Payout ratio & dividend growth%. Generally DY>5% (~2x FD) with payout ratio of <50% (sustainable) and dividend growth >5% (chase inflation) is a good bet.

However that's my layman 555 formula, other investors might have different ideas...

This post has been edited by gark: Jan 21 2013, 12:13 PM

Basically Free cash flow must > Dividend... otherwise the cash not enough to pay dividend.

FCF = Operational cash flow - capex

For growth look for EPS (capital gain), dividend stock look for FCF (dividend gain).

This post has been edited by gark: Jan 21 2013, 12:32 PM

All dividend, capital gain and interest from SG stocks is tax fee in Sg and not taxable in Malaysia, ie. tax free.

Dividend is single tier in SG, which is taxed at corporate level. You are not taxed by SG govt as part of your income declaration. Also you are not taxed by MY Govt as it is foreign income. So you buying SG for dividend you get net amount (as declared) same as Singaporeans, so level playing field.

This is opposed to US dividend, in which it is taxed at corporate level AND as a foreigner you get taxed another 30% withholding tax even for REITs.

This post has been edited by gark: Jan 22 2013, 10:08 AM

No need for tax treaty, all FOREIGN income not originating from Malaysia is tax free. (This law to help the crony hide their money is swiss bank account and park their money out of Malaysia. Why you think MY has the highest fund outflow compared to other countries? )

US is withholding tax, means even though you have tax treaty still TAX you kau kau. .. Unless you declare US income tax, then you can reclaim some of it.

So single tier div from Malaysia = single tier div from SG = whats the problem?

For dividend stocks.. you need to look for dividend growth.. & dividend raise consistency. No point investing in a stock which gives higher then lower dividend each year, and the share price will reflect the disappointment. Also if dividend is more or less the same year after year, you are not beating inflation. If a stock can consistently raise dividend year after year, there will be no worries on the stock price as it will follow suit. Usually these are very strong, cash rich companies, which can withstand any recession and can still pay out good dividend.

Dividend growth investing - best combination of dividend and growth stocks investment.

This post has been edited by gark: Feb 20 2013, 11:09 AM

I think you might not understand the term dividend growth. Lets say you buy a company share at RM 1 with dividend of 4c per year, that's 4% DY right?

The company continue to increase the dividend rate by 1c per year (dividend growth) at end of year 6 the dividend is now 10c/share. So your yieldbased purchase cost is now 10%.

But since the market sees increased dividend and revalue to share at 4% DY (based on current yield), then the share will be worth RM 2.50 to justify this yield.

Even if the share price drop temporary during recession, as long as these company continue to increase dividend year on year, the share price will be reflected sooner or later. While you sit it out, just collect the dividend lar.

Of course all the above is just an example, but there are lots of real life examples of the above such as dutch lady, nestle, GAB, Digi etc etc Internationally will be coca cola, J&J, etc

This post has been edited by gark: Feb 20 2013, 02:11 PM

NCB's dividend is not sustainable, sooner or later the dividend is going to be lowered... payout ratio is 174.6%.. where did you get the 42%

4QEPS =39.1 cent
4QDIV = 73 cent

How to be sustainable? Also these high dividend is only for 2011 and 2012 only...before that the dividend is in the range of 30 sen. Don't just look at yield, look at other factors as well...

This post has been edited by gark: Feb 27 2013, 08:06 PM

If a company pay off all their earnings and remaining cash bank as dividends, it mean they will not have much leftover for additional expansion or they think that the future prospects is not good hence returning money to shareholders. Usually these are sunset industries (ie. tobacco) or industries which have regulated and can not expand further (NCB) as an example.

For me dividend investing we must look at dividend growth and dividend sustainability as a good criteria to ensure that the dividend increase will outstrip inflation and also the company is capable to continuously invest to grow earnings. For me a company with dividend growth of minimum 5% y-on-y and payout ratio not exceeding 50% is what i am looking for. History shows that company which is continuously growing the dividend will have the best of both dividend and capital gain (ie. Nestle, Dutch Lady, GAb...)

US have a good list of dividend aristocrats (increasing dividend for 25 years continuously) and dividend achievers (increasing 10 years)... anyone have the time to compile this list for Malaysia?

This post has been edited by gark: Feb 28 2013, 10:02 AM

Not just cashflow... but FREE cashflow.

Ie. Cashflow from Operations - Capex = FCF

That is only 3 years.... you free to compile the 10 year list? Will be a great list for all dividend investors...

This post has been edited by gark: Feb 28 2013, 10:06 AM

Ini accountant say one must be true.. hahaha. That's why we look at operating cash flow - capex...

This post has been edited by gark: Feb 28 2013, 10:19 AM

There are some companies paying dividend higher than cashflow. This are mostly from cash in hand (Amway, Tasek to name a few...) and the worst bunch are those taking loans to pay dividends... ( ).

Are you familiar with a company called Lindt.. the chocolate maker, traded in the swiss exchange, they depreciated machines and buildings in matter of months... Those that caught on this early were richly rewarded... as it was selling wayyyy below value. Super conservative company...actually hiding earnings.

This post has been edited by gark: Feb 28 2013, 07:46 PM

Wow.. dividend investors must be disappointing with the smaller dividend after gorging on the high dividend in 2010/2011.. today the share lost 23 cents/share...

There are quite a few of them... with increasing dividend payout over the years, but they don't come cheap.

Look harder...

This post has been edited by gark: Mar 2 2013, 12:02 PM

P/E & P/BV wise lar.. RM-wise is not a valuation factor.

This post has been edited by gark: Mar 2 2013, 04:43 PM