godhand investment

The Beauty of Dividend

godhand
Publish date: Sat, 23 Mar 2024, 11:20 AM
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To common folk the term ‘dividend’ simply means a distribution of profit by holding on to a stock.

However, to an individual who can utilize it to its full potential, it can buy you your future time by replacing your active income, it can become a tool in building credit facility, it can help your cash flow achieve flexibility like water, it can increase your non-taxable income (KLSE), it can help you leverage more.

In accessing a company dividend can help you filter the limes out. Only company with utmost integrity has the capacity to construct a clear cut and transparent dividend policy. 0%-20% when it is in expansion phase, 30%-50% in semi expansion and 70-90% when there is minimal growth for expansion or when the company has hit its terminal value. Now if you look at bursa or other index how many companies have a transparent pathway to how the minorities should be getting paid. The answer is not many simply because it is not easy to commit. During expansion phase, investor can assume lower to no dividend but after the cost breakeven period the company should be able to provide increased dividend based on its operational cash flow to debt ratio.

Companies goes for Initial Public Offering because they need money. Investors must understand this basic concept before jumping into the bandwagon.  So… to read their intention first hand is very important. I would say to ‘call a bull’ is the most important skill when it comes to investing. The reason is simple. If a listed company has a malicious intention to cheat, you can throw the book out the window. In the end of the day, you just need to look at the management face and tell yourself do they have integrity or ‘simply just read them by how they are structuring their dividend payout’. So, which is easier? Bear in mind even business magnate like Robert Kuok was cheated many times in his lifetime.

To common employed people, it is not easy to achieve financial freedom but it is also not impossible. Dividend is the only way other than rent easily accessible to anyone. It is also the only certainty to minority shareholders who do not have any controlling power in a company. So my question is why assume and gamble when you can have certainty?

Godhand

I3vestor

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Discussions
1 person likes this. Showing 6 of 6 comments

Sslee

I just cannot undestand why Bursa SC allowed LTIP share grant.
Look at jaks what had BOD and management had done to deserved multi- million LTIP free share grant?

(i) Based on the total number of issued Shares of 2,369,850,544 as at LPD.
Since the Effective Date up to the LPD, the Company had granted 174,154,760 Shares pursuant to share grant plan of the LTIP in the following manner:
Eligible person(s)
Total number of Shares granted pursuant to share grant plan
(‘000) (i)%
Directors 120,456 5.08
Key senior management 47,913 2.02
Other eligible employees 5,786 0.24
Total 174,155 7.34

1 month ago

Sslee

And then KSL profitable company paying the controlling shareholders 3 brothers as executive directors (now appointing their daughter as executive director) more than RM 10 million each but just refuse to pay any dividend to shareholders.

1 month ago

calvintaneng

So the best course of action is:

Choose companies that already give clearcut guidance policy with regards to dividends and dividends can only be derived from real operating income or from asset disposal which had made handsome gains due to price appreciation

1 month ago

calvintaneng

In the current context

Palm oil 🌴 has the best
of times with the rebounding of Cpo above Rm4000 MT
For some the cost of Cpo production only Rm2000 MT.
So a 100% gross profit margin is exceptional

As such we see fast growth Palm oil like Jtiasa and Tsh got 2% dividend policy

Taann and Hs Plant 6% dividend policy

For Innoprise plant dividend is as high as 80%

1 month ago

speakup

Many good REITs like Igbreit, Sunreit, Alaqar pay dividends 6%

1 month ago

Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥

Putting dividend in its right perspective. Those who need income, will probably have to stay with dividend yielding stocks.

For others, dividend should not be the main focus. If you have a long term investing time horizon, invest in great company that can grow its revenues and earnings over many many years. This company, in its early formative year, usually distributes no or little dividends. It may distribute 20% or 30% of its earnings as dividends. Because its business is growing so fast, its retained earnings are put to work at high ROE.

Over the many years, you will find that your investment in this company rewarded you a lot more than the very high dividend yield stock (which are usually slow growers or no longer growing, except for 1 or 2 which do not require any retained earnings to grow).

For example:

Company A: Bought in 1992 @ RM 8.00. Its DY was probably 1.5%. Today, it has grown its earnings many folds and its dividend per share is RM 2.00 giving you a DY based on historical cost of 25%. Of course, its share price has appreciated a lot too.

Company B: 2005. You might have bought this stock for RM 2.00. At that time, it was growing fast. Its DY was low but it has been paying increasing dividends due to its increasing earnings. Today, its dividend of 70 sen per share, is a DY of 35% based on your historical cost of RM 2.00.

Note that in bought these companies, the dividends received were many times better that the high dividend yield stocks that did not grow over the same number of years.

3 weeks ago

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