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High dividend yield: A proven successful strategy to build long-term wealth kcchongnz

kcchongnz
Publish date: Sat, 06 Apr 2019, 12:57 PM
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This a kcchongnz blog

Return of Watch List of High Dividend Yields Stocks on 5th April 2019

Dear participant,

I love buying good dividend stocks for the following reasons:

  1. A stock dividend is a real thing. You receive it in cash.
  2. It provides a “floor” for share price when bear stampedes, as dividend is good and we are not afraid of the share price dropping further.
  3. Dividend keeps us in touch with the real world and will not chase the share when it is trading at sky high price.
  4. Dividends prevents you from being side tracked by events which have little or no real benefits to shareholders, such as bonus issues, share split, free warrants, corporate moves etc.
  5. It gives out a positive signal to investors that the company is doing well, and hence able to return cash to shareholders.

High Dividend Yield (DY) investing strategy is a very plausible quantitative investment strategy to provide satisfactory and safe long-term return. This has been proven in numerous academic researches and the good experience of many super investors.

Less than four months ago, I have posted in our private blog and sent to you a watch list of carefully selected and diversified 26 high dividends yields stocks from my own expanding data base meeting the above criteria following the high DY investing strategy for your consideration for investment. The closing prices of the stocks were on 12th November 2018 as shown in Table 1 in the Appendix.

Here were some checks on the stocks following this high DY investing strategy:

  1. Dividend yields at least the same as the bank fixed interest rate, currently about 3.5%.
  2. Dividend pay-out ratio should be less than a cut-off, say 65-85% so that there is money left and the business can still grow with the reinvestment for potential increase in future dividend.
  3. Reasonable expected growth rate in earnings at least matches the overall economy, say >4%, also for the potential growth in dividends in the future.
  4. Strong balance sheet for sustainability of dividend payment, even at down turn of broad economy.
  5. High return of equity and capitals > 10% such that the dividend payment is not only sustainable, but grows from internally generated funds.
  6. Good free cash flows from where dividend is paid from internally generated funds, and not from more borrowings or issuance of more shares.
  7. Shareholder-friendly management dedicated to treating shareholders as owners. A good and consistent dividend history will serve as an indication.

Four months have passed. Table 1 in the Appendix shows the performance of the portfolio of 26 stocks.

Over the last four months, the broad index declined by 1.4% from 1665 points on 11th December 2018 to 1642 points on 5th April 2019. The FTSE Bursa Malaysia Small Cap Index rose by 0.8% from 13024 to 13124 points during the same period. The portfolio bucked the trend of the broad market and returned an average of +6.2% during the same period, including all dividends paid or ex-dated during the period. This total return out-performed the return of the broad market by a wide margin of 7.6%.  

There were 7 losers out of 26 stocks, or a success rate of 73%.

The notable double-digit outperformers in the four months are Carlsberg at +34.9%, SKPR at +26.2%, Heineken at +24.6%, FAVCO at +18.2%, HLI at +15.6%, Globtronics at +12.4%, and Magni at +12.3%.

A little less ideal, there are 4 under-performers with double-digit losses. They are Superlon at -13.8%, LCTitan at -11.5% and Homeritz at -11.7%. This sprang a surprise to me as this high DY strategy has proven to be a safe investment strategy. The earlier 2 was due to poor sets of quarterly results announced during the period. This again reaffirm the need of diversification in our investments, otherwise if you were so unlucky to have been holding those 3 stocks alone, you would have lost a lot of money.

In summary, the portfolio of 26 high dividends yields stocks selected four months ago did very well compared to the performance of the broad market, with a high excess return of +7.6%. Furthermore, there are a greater number of higher excess returns winners and fewer and less losses in losers.

Heads I win more; tails I lose less.

That is the essence of fundamental value investing.

It is noted that the above result is a short-term result which may not reflect the long-term return. Building wealth is a long-term endeavor, and that must always be embedded into our heads.

Some of the stocks may have risen in prices above their estimated intrinsic values, and for some their fundamentals may have deteriorated. There may also be new stocks meeting the high DY strategy.

I will forward you a revised portfolio of high dividend stocks for you to consider investing in soon.

High dividend yield investment strategy, I must emphasize that it is not merely picking the stocks with high dividend yields, is a very plausible investment strategy. It has proven to be working in the mid and long term. My own personal experience has proven so.

 

The quantitative high dividend yield investing strategy is just one of the many plausible and proven successful ways to invest in the stock market to build long-term wealth steadily, safely but surely. There are many other ways to achieve satisfactory results, but they all boil down to one very basic principle; that one should treat investing in a stock as investing in part of a business, that the success of investing comes from investing in good companies, when they are selling cheap or at reasonable prices.

I do not know much about other method, but intuitively, I don’t think any other method is more reliable than this for a retail individual investor. However, this is just my own opinion. People who sell flowers do normally say their flowers are more flagrant than others.

If you do not have the necessary knowledge and experience but wish to learn about this fundamental approach in investing in a more comprehensive and structured manner, and have someone to ask questions when encountering problems while learning, or if you do not have time and simply wish to rely on someone who is trustworthy and the proven successful methods in investing to get some ideas to invest in, you may contact me at

ckc13invest@gmail.com

Yes, there is a small fee on this. Good things don’t come free, and free things, especially in investing such as tips, rumors and hypes, as you should have encountered, are normally not good.

Happy investing.

 

KC Chong

 

 

 

 

Discussions
5 people like this. Showing 11 of 11 comments

Drawer

Oh. U preaching dividend investing now kah?

2019-04-06 13:26

Iamyou

Congratulation for beating the market.

2019-04-06 13:47

ks55

7 quick steps to pick the best dividend stocks

https://fifthperson.com/7-quick-steps-to-pick-the-best-dividend-stocks...

2019-04-06 14:02

yklip

What?! You call this value investing?!

2019-04-06 14:31

ks55

Blog: “Why am I always make losses in the stock market?” kcchongnz

Aug 23, 2018 11:10 PM | Report Abuse

Posted by kcchongnz > Aug 23, 2018 08:09 PM | Report Abuse

Posted by ks55 > Aug 22, 2018 05:09 PM | Report Abuse
RMB now 57.96 sen. It will go to 60sen soon. Can it go to 70 sen? 80sen?
Invest in RMB dominated collectibles is equivalent to invest in RMB. Invest in RMB dominated collectibles is equivalent to invest in RMB.
中國瓷器
大師國畫,墨宝
名家紫砂壺
勐海茶廠、下關茶廠改制前普洱茶
印级普洱茶
OBOR Initiative coupled with Xi's Speech on 19th CMC Direction for China future development (Dream), China's economy can only growing from strength to strength.
RMB exchange rate denotes the health of China economy. Like it or not, it will further reflect its value five years down the road.

See?
Is it that difficult to make 26% ROI yearly for next 10 years to come?


One very interesting thing about finance and investment is that it is about the future, and the future is full of uncertainties.

With regards to the movement of macro thingy like foreign exchange rate, nobody has done it right consistently and there is no statistical significance evidence to show that anyone can do it.

The interesting is the power of arbitrage. If some investment is so good that you are expected to get CAGR of 26% over the next 5, 10 years, 20 years, the price of the asset would have been bidden up right now that you won't be able to get that CAGR.




FYI kcchongnz, seeing is believing.
Find out from those who invested in puer tea what could be the return like.
勐海茶廠、下關茶廠改制前普洱茶
印级普洱茶 are sure to make windfall profit.
Why? Ask MD of Hai O Mr Tan Keng Kang to find out why.

Common talk in puer world is to make 10 times in 10 years is some how guaranteed. That is to say 100 times in 20 years is not unrealistic. It is a mere 26% increment per year.
No one dare to promise you will make 5 times in 5 years, or 25 times in 10 years. Again it is only a 37% increment per annum.

The truth is for past 15 years, certain 勐海茶廠、下關茶廠改制前普洱茶 and
印级普洱茶 appreciated more than 50 times. And these produce are going to continue the up trend at even faster rate.

Very safe if you go for 中期茶, i.e. those already aged for 15 years, and you already know which one will continue to appreciate faster than others as supply can never increase but demand keep on increasing.



http://www.donghetea.com/category.php?id=114

2019-04-06 14:32

kcchongnz

Posted by yklip > Apr 6, 2019 2:31 PM | Report Abuse
What?! You call this value investing?!


Good comment!

So lets hear what is value investing to you. Please.

2019-04-07 12:50

Lyo82

There are so many methods in investing, no right or wrong about that.

However I agree with author that high dividend yield investing strategy is most suitable for retail investors, especially those who need to work from 9 to 6 daily.
As an employee they should focus into work with peace of mind without being distracted by market's up and down. Shouldn't they?

I am not sure.. but how many of us gave a chance to Carlsburg and Heim 3 months ago?

2019-04-07 17:40

bursadiary

Yes lah!

KCChong is back!

Post more articles!

2019-04-07 23:46

4444

If invest in Hai O bec high dividend in 2019 die.

2019-04-08 04:07

4444

Yes, there is a small fee on this. Good things don’t come free, and free things, especially in investing such as tips, rumors and hypes, as you should have encountered, are normally not good.

2019-04-08 04:09

4444

Rank 71st want to charge fee? Fee is sure money not buy stocks?
https://klse.i3investor.com/blogs/stock_pick_2019/200226.jsp

2019-04-08 04:11

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