Tuesday, September 28, 2010

Singapore's Dividend Aristocrats

The S&P Dividend Aristocrats is a list of stocks in the S&P 500 index that has increased dividends for at least 25 years. As you might guess, this is definitely a very tall order and as of 2010, if I remember correctly, only 10% or 50 stocks made it to the list. It is expected that the list will further dwindle to 40 stocks or so which prompted some to ask whether the criteria is too stringent.

Well, that is the way with our world, I guess, when we don't make the cut, we can always lower the bar ourselves. Haha!

Anyways, some of the names on this prestigious list are very well known, like 3M, Johnson and Johnson, Becton Dickinson, Coca Cola and P&G etc. Thet last four are also famous holdings of our hero.

Intrigued, I went to take a look at which Singapore stocks had a good track record of increasing dividend. Well as our history is not as long, I used a looser criteria of increasing dividend for at least 8 out of the past 10 years.

Here is the list of stocks.


Well, I guess you are as disappointed as I am. Only 8 stocks made the cut. Of which 3 pays a miserable 2% dividend. 2 are in property and construction, a treacherous sector. Another 2 of them belong to the same group entity. And 1 of them is not even a Singapore company.

There are 2 banks, but value investors are very wary of banks bcos there are just too many moving parts to get a good read on these financial beasts. Even Buffett had his fair share of trouble with Salomon Brothers 20 years ago and now Goldman Sachs, which is being criticized for screwing clients left right centre.

Raffles Medical, one of the 2% yield stock, might be interesting but its valuation is way too high at 26x. Might be worth doing some research now and wait for a good entry point.

The truly investable Dividend Aristocrat of Singapore might be SPH but it's main business is in a declining franchise and its high property value is based on frothy valuation in a flood infested shopping district.

In a nutshell, using the dividend arisocrat criteria cannot help us find good stocks in Singapore. We might have some luck elsewhere in Asia.

10 comments:

  1. i agree with you that SPH has limited upside in terms of share price. its business model has been upstaged by the internet.

    do you think singapore post will go the same way?

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  2. Hi 8%,

    Try HSBC:

    http://www.hsbc.com/1/2/investor-relations/share-info/history

    Except for the troubled years of 2009/2010, they had been increasing their dividends since 1997. That's at least 10 consecutive years of increment.

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  3. Hi SSP,

    I haven't done enough research on Singpost but what I can say is that national postal delivery companies are usually in difficult state as they have a lot of legacy inefficiency, old workforce that is slow to change, need to provide loss-making services to the public etc.

    Singpost might have done away with some of that and there is some room to grow with its consumer credit business which will cover the slack in mail delivery.

    But all in all, it's somewhat similar to banks whereby there are too many moving parts and hence difficult to make accurate judgement.

    Moveover, at 15x PE, it's not exactly very cheap. I think there are other stocks that could be more exciting.

    But if you are holding it, it still gives dividend and it is unlikely to cut that. So it's not a clear sell also. Just hold on and get the dividends, until you find a much better stock to park the money.

    Hope this helps.

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  4. Hi La Papillion,

    Thanks for the idea. HSBC is definitely one that have emerged relatively unscathed. Will take a look at the firm.

    Cheers!

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  5. My favorite is Adampak.

    PE 9.1
    Div Yield 8.47

    Dividends every and now expanding their client base

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  6. May I know how and where did you get the data for the above analysis? I have been trying to perform similar analysis over the whole spectrum of shares counters in STI but am unsure where i can download data to do it. Appreciate if you care to share. Thanks.

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  7. Hi Dave, Adampak does look interesting, thanks! It was also in my previous list of dividend stocks

    Hi yeti, I get my data from financial providers like Bloomberg, ThomsonReuters etc

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  8. Hi, 8%

    As you said "Bloomberg ThomsonReuters", do youvmean the public website or paid service?

    Btw, one thing I always confuse is, P/B is so low, is it right? If less than 1, means book value is higher than market value?

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  9. Hi John

    Well, it's the paid service.
    The P/B can be less than 1 which means that yes we should liquidate the firm and pay all the shareholders. Bcos if P/B is say 0.7, essentially you are using 70c to buy $1.

    But the market some times price stocks below book (ie P/B less than 1) for a long long time and that usually means that it's a shitty business and the book will decline in the future.

    So unless you can find stocks that are like less than 0.5x book plus you know the book is solid like perhaps mostly in cash or other real assets. Then we can probably say it's a good bet.

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  10. I would like to share that inflation raise dividends, such as the “Dividend Aristocrats.” This gives you a stream of income that rises as fast as the cost of living.


    sgx dividend

    ReplyDelete