AyamTua

in short dividend-vesting also applies to hexza, willow and ntpm ... :-))

2014-04-05 09:16

爱丽斯 梦幻世界

If an investor investing a company with only hope can get dividend. I think he/she already right in attitude. He no need check the counter price frequently. I still far from this type. Still learning. Thanks KC Chong Nz for sharing.

2014-04-05 09:29

bsngpg

My emphasis on div is about 40% and another 60 % is on growth. When my age gets older or when the market is on higher valuation likes now, my emphasis on growth will be reduced while weightage on div increases. With these criteria in place, I do not buy BToto, Tenaga, BAT, GAB, Jtinter etc which give good div but fewer prospects on growth. How about Pintaras ? .........

2014-04-05 11:51

kcchongnz

Pintaras at RM3.13 now appears to be not cheap when compared with its adjusted price of about RM1.00 three years ago when I first wrote about it. Since then I still keep on writing about it.

Its dividend has grown by 50% from 10 sen to 15 sen now since three years ago. At this price its dividend yield is 4.8%, still much better than the bank FD rate. However the FD rate is not expected grow much for the next few years.

On the contrary, the dividend of Pintaras has been growing at 25% for the last 5 years and is expected to grow at least 10% for the next few years in my opinion. This is because the construction industry is expected to remain bullish until 2019 according to some analysts. Pintaras earnings and hence cash flows will grow at a reasonable rate of say 8% which will provide the cash required for a growing dividend payment. This is evidenced from its recent jobs secured. Furthermore, it has RM1.00 cash or cash equivalent in its balance sheet which will provide sustainable dividend payment for its shareholders.

I in fact expect the capital gain from its growth in earnings and expansion of the PE ratio will outpace the return from its dividend payment by a wide margin.

2014-04-05 17:38

KinSoon Kok

The reason why so many people kill the goose 4the golden egg is the absence of div. Therefore, I think one should have both growth & income stocks in portfolio in order to nurture the growth stocks as long as possible. Looking at unrealized paper gain surely excite us for a short period but definitely not for long.

2014-04-05 18:43

sunztzhe

The issue at hand is not whether dividends matter...the real issue at hand is to ask whether that particular company is well managed and is capable of growing its EPS and is in a growth industry for a certain period of time.

2014-04-05 23:28

kcchongnz

Posted by sunztzhe > Apr 5, 2014 11:28 PM | Report Abuse

The issue at hand is not whether dividends matter...the real issue at hand is to ask whether that particular company is well managed and is capable of growing its EPS and is in a growth industry for a certain period of time.


Excellent comment. If a company like Pintaras can earn a marginal return of capital of 19.4% each year, isn't it more sensible to leave the money in the company to continue earning that return, rather than withdrawing the dividend and spend it, if you trust the management? And where else can you get a return of 19.4% with the money you withdraw as dividend?

Need income? Why can't you sell part of the holding to get the income you need?

However, it is a positive signalling effect in good and growing dividend payment, showing the company is doing well in its business. A growing business will continue to grow its earnings and hence shareholder maximizing with the capital growth of its stock price.

For some companies with good earnings but little or no dividend, and questionable management capability and trustworthiness, it is good to have the dividend, rather than leaving all the money there for the management to manipulate, and engaging in shareholder value destroying such as wasting the cash in poor acquisition and hanky-panky business etc.

2014-04-06 07:55

bsngpg

“Need income? Why can't you sell part of the holding to get the income you need?”
With the same concept may I ask the same question from the opposite angle?
Need cash to expand biz ? Why can’t the mgt issues right to gather fund from shareholders?
Why can’t the mgt borrows from bank to grow biz ?
Isn’t it that the return of biz expansion should be higher than interest rate else why expand? This is with assumption that the mgt does not over borrow else it will lead to more complicated argument.

2014-04-06 08:32

bsngpg

“growing dividend payment, showing the company is doing well in its business.”

This is the greatest part of investment in equity. When I bought Zhulian at 0.90, I received 11sens div per year(~12%). With the fixed DPO at 60%, I received 16 sens last year(17.8%). It indicates earning has grown by 17.8/11=62%. I simplify the case without factoring in the 1:3 bonus issue in 2010.

Note : the above is history data. Lately Zhulian somehow turned turtle.

2014-04-06 08:43

bsngpg

The concept of public listing is to gather public money to grow a biz and share the return with the shareholders in the form of capital gain and div.
For many investors, dividend makes up part of the very important factor if to invest into a particular company. I do not have an official data, however I opine that EPF, Khazanah(ASN, ASB etc) and many dividend funds prefer companies with div as they need the div for the unit holders.

2014-04-06 08:49

kcchongnz

That is the whole point about capitalism, issue equities and debts for doing business. Debt is much cheaper than equity as the cost of debt is low at about 5%(?) now whereas the required return from shareholder is much higher than that (10%-15%). Hence it is better to borrow a lot of money to do business, so long as it doesn't cause the risk of bankruptcy when the economy turns for the worse. An optimal capital structure could be about 40% debt and 60% equity. That is perfectly alright. For this, look at those companies which provide ample free cash flows such as Nestle, BAT, Carlsberg, etc.

You may be mistaken that I shun debt, not at all. It is only when I compare two similar companies like the link below:

http://klse.i3investor.com/blogs/kcchongnz/49016.jsp

Company A and B both are in the similar business, having the same ROE, and both trading at the same PE ratio. Here it is very clear that company B with less debt and more excess cash is better than A which has less excess cash but more debt.

In Pintaras case, I prefer the management to pay out all cash and cash equivalent (RM1 per share)to shareholders, and even borrow some money and return this borrowing to shareholders. Pintaras can do it as it has the cash and the capability to borrow, and alter its capital structure, and yet would not affect its profitability, ROE etc significantly, and hence its share price. And that is the beauty of it having a lot of excess cash. Again, that is theory. There may be plausible reasons why Pintaras need to keep that cash. May be impending expansion. Need to buy more plant and equipment for more profitable jobs?

If a company has a lot of debt, how to do what Pintaras can do above?

2014-04-06 08:53

sunztzhe

If the company management thinks it cannot further improve the future EPS consistently with the excess cash that it has , it is better for management to decide to pay out dividends to shareholders with the excess cash it does not require for its business

2014-04-06 09:48