Eight percent per annum: Value investing in Singapore stocks: Dividends

2018 Dividend List - Part 4

2020 Dividend List

2019 Dividend List

2018 Dividend List - Part 3

2018 Dividend List - Part 2

2018 Dividend List - Part 1

2017 Oct Dividend List - Part 2

2017 Oct Dividend List - Part 1

Thursday, October 17, 2024

Tokyo Dividend List

This post is also on 8percentpa.substack.com

In this post, we shall explore dividend stocks in a brand new market, Japan!

Thanks to poems, we have the ability to screen US, UK, Hong Kong, Singapore, Malaysia and Japan! Japanese stocks have never been interesting since they paid little dividends, had lower ROEs and lower margins. But things seemed to be changing with the Nikkei breaking its 1989 high this year.

Let's look at the list:

The names above show the blue chips of Japan and companies we have heard of. NTT, Bridgestone, Komatsu. Today, the trade at 3-4% dividend, at single digit to low teens PE and some below book value while Nikkei rises above all time high. It seemed we might be able to find some bargains. The criteria for the screening is as shown below:

As per past screens, we simply used ROE of 10%, operating margins of 8% and dividend at 3% which churned out the interesting list of names. While there are many interesting names, I would highlight the following two: Bridgestone and Tecmo Koei.

Bridgestone

This is the world's largest tire company trading at 1x Price-to-book while giving a 3.6% dividend yield. The stock has always traded cheaply as there isn't much growth in the auto industry and tires being tires, are just not sexy enough. Listed in Japan, it is also associated with the Japanese auto industry which is being disrupted by electric vehicle. Toyota led Japan into the hybrid and hydrogen solution for cars only to be upended by Elon Musk and then China.

Nevertheless, unless cars can fly, they need tires and Bridgestone will continue to grow as long as we buy cars. Management simply needs to buck up and drive the company to grow or perhaps consolidate the Japanese tire industry with still at least four tiremakers fighting each other in Japan much like the shoguns back in history.

Tecmo Koei

This is a Japanese gaming company famous for its slash and cut games based in Chinese and Japanese history. It has carved out a 40 year niche in this gaming segment. Some of us might remember playing the classic Three Kingdom strategy game back in the 1980s. Gaming is a highly profitable and highly cashflow generative business and Tecmo Koei has simply compounded growth as such.

Today it is trading slightly cheaper against its peers as the company has not been able to create more hit titles. The founding family also still owns a big chunk of the company and therefore restricts trading volume. But at teens PE and 6-7% FCF, it does feel cheap.

That said, we have not studied Japanese names in detail. These names are also not in the portfolio. So do do more research and always remember caveat emptor!

Huat Ah!

Past lists:

2024 Dividend List - UK!

2024 Dividend List

2020 Dividend List
2019 Dividend List
2018 Dividend List - Part 4
2018 Dividend List - Part 3
2018 Dividend List - Part 2
2018 Dividend List - Part 1
2017 Oct Dividend List - Part 2
2017 Oct Dividend List - Part 1

Friday, May 17, 2024

UK Dividend List

This post is also available on 8percentpa.substack.com.

The world is moving into a new high interest rate environment and as investors, we should be demanding higher dividends. Today we are looking at UK's dividend plays. The UK is one of the few countries in the world with no withholding tax on dividends. The other is Singapore. Today, we shall take a look at what are the good UK dividend stocks using our favorite poems screen.

The usual poems screen with idiosyncratic cut-offs like 8.5% ROE

As per previous years, we have used the above screen with ROEs, ROAs and Operating Margins driving the screen. The UK list this year generated 20 odd names. Many of which had been discussed here: Reckitt, Diageo, BHP amongst others. They are still here because they have not outperformed. The market has been very focused on the Magnificent Seven and similar stocks such that the rest of the good old names are forgotten. We believe the above names are compounders and the investment theses described are still intact.

Good UK names

The other top names are also worth mentioning. Unilever and its closest rival Nestle have also been good compounders currently trading at reasonable valuations. Rio Tinto is similarly another version of BHP. We all remember BP and Deepwater Horizon. Amazingly, it rebounded 2x from there, collapsed near those lows during the pandemic and is now almost at all time high! It appears on this screen because cyclical names like oil majors have good ROEs at the peak. So this is not a call to buy BP.

BP's share price

The flavor on fossil fuel names have also changed with Greta Thunberg and her environmentalist gang shaming our generation and companies destroying the planet. Stocks like BP and miners are unable to command good premiums and hence the high dividend. The other name that falls into the same category is Imperial Brands (formerly known as Imperial Tobacco).

Burberry looks really interesting with its share price almost halving in a couple of months. It is very rare to see a luxury name on such lists. We have done the due diligence so there are no good analysis why the stock tanked and whether it is a good buy today. It does look reasonable on 14.7x PER, 6.8x EV/EBITDA and free cashflow c.7%. If it gets cheaper, LVMH will snap it up in a snap!

Burberry's share price

That said, works need to be done. This author had never bought well buying something on three sentences of analysis. But perhaps some readers have the luck and if you do make money please report back!

Huat Ah!

The past list:

2024 Dividend List

Thursday, January 18, 2024

2024 Dividend List - SGX

The start of the year brings fresh aspiration, perspectives and ideas. This year, we start early with the dividend list using Poems' screener. It is quite basic but allows us to screen using ROE, ROA, Dividend along with the usual market cap and valuation cut-offs. So we tried the following:

Market cap > SGD 500m
ROE > 10%
ROA > 4%
Dividend Yield > 3%
PE < 25x

As we know, the Singapore Government 6 month Treasury Bills currently gives us 3.7%. So to be buying for dividends, we would actually require a much higher yield (perhaps 5% or more), otherwise we should just buy T-bills right? However, with high yielding stocks, if they are not generating high enough returns (which is why ROE is important), they are basically paying out their equity base. One of the stocks we discussed actually exhibited this:

Overseas Education pays a 7-9% dividend over the past years, but as there was no growth (revenue did not grow and ROE was only 3-4%), the stock price simply falls by that amount annually as exemplified by the share price chart above. But anyways, that's enough digression. Let's look at the list (sorted by market cap) today:

The first section of the list shows the blue chip names and we have Thai Beverage and SGX discussed in depth on our platforms. It is also interesting to note that most names are trading at teens PE which alludes to the cheapness we see in the Singapore market today. As for other noteworthy names, Raffles Medical is definitely on the cards.

The second portion of the list shows names going down the market cap ranking quickly. Since we cut it off at SGD500m, the last name appears to be Vicom, which is also discussed on this platform. If we remove that filter, we can another 57 names with the last name at just SGD6m market cap. Well, these are not primarily our concern. The interesting names that popped up are the watch distributors Hour Glass and Cortina, with double digit ROAs and trading at single digits PE and give close to 5% dividend, they are worth studying!

As usual, here's the past lists:

Huat Ah!

Friday, May 19, 2023

2023 Dividend List

The wait is over. Today we will talk about *drumrolls* the 2023 Dividend List. This list has consistently generated the most popular posts on this infosite over the years. I started using Poems' simple dividend screen a few years ago. It allows adjustment for only 8 factors: ROE, ROA, Operating Margin, Dividend Yield, PE, PB, Current Ratio and Debt/Equity. While crude, it worked and we discussed good ideas in the years past (the full lists at the end of this post). This year, I came up with a 8818 4D winning formula to screen and would like to share the results.

The above shows what 8818 is about. ROE > 8%, Operating Margin > 8% and PE < 18x. Dividend is no longer used as a criteria so it has become a misnomer to say this is a dividend list. But since Poems will always show the dividend yield, we can still see it as a reference and surprisingly, all the stocks featured today pays dividends. Although it doesn't really make any sense today to buy anything for 4% dividend since we get that risk-free buying Singapore T-bills. However, if it is a name with strong growth but still gives 4-5% dividend, then it's a steal. Buy, buy, buy!

For the Singapore market, I have cut off the market cap at SGD100m and we have 77 names. The last name cuts off at market cap of SGD1.5bn and honestly, I have also avoided small caps because the risk of seeing that investment going zero is way too high for me to stomach. I have discussed this point in Lessons Learnt from My 4 Biggest Losses. As such, the screenshot shows the top 30 names, the good blue chips on SGX sorted by market cap. We see the banks, REITs, Thai Beverage, Jardine Cycle and Carriage, Yangzijiang, Property names and Venture, Singapore's answer to Foxconn, albeit in a very small way, led by its founder Wong Ngit Liong. The following shows Venture's share price.

While it does not show the usual compounding graph, we can still see that Venture has created some value in the last 10 years after a long stagnation from the early 2000s to 2016-17. Contract manufacturing is a difficult business and hats off to Mr Wong and his team for being able to reinvent themselves, bringing the share price to $30 at one point. Venture went into niche contract manufacturing for MNCs by providing Singapore's branding for quality, process and timeliness and made a killing there.

But, let's move on from Singapore. In the next screen, I used the same 8818 (i.e. >8% ROE, >8% OPM and <18x PE) for NYSE, Nasdaq and Amex with the market cap cut off at USD100bn. Unfortunately, that is the quantum difference between our Little Red Dot and the World - USD100bn vs SGD100m as the cut-off in market cap. *Sigh* Anyways, the following shows some of the biggest names in the world today:

I would note that TSMC is the most interesting name but it also comes with the most dangerous risk: China invading Taiwan. If that happens though, everything will be falling apart, so not sure which is worse, owning a diversified portfolio with TSMC or owning a lot of stocks in general that will see 20-30% drawdown if war breaks out. I don't have a good answer and that is why I have also advocated buying physical gold. In the middle of WWIII, all your stocks and money in the bank account may not be worth much, but physical gold will get you food and petrol in your $100k COE car.

The last screen is the same 8818 criteria for LSE listed names. I would highlight that BHP and Unilever which appeared in both the London and US screens are good compounders. The chart for Unilever below shows the nice exponential curve as most compounders' long term share price chart shows. Different from the Venture one right?

Interestingly, we are also seeing many stocks trading below 1x PBR (e.g. HSBC and British American Tobacco) that has good ROEs and not necessarily basket cases. During the growth era from 2010 to 2022, this couldn't happen. Perhaps we are truly in a new value era. Long Live Value!

As usual, here's the past lists:

Huat Ah!

Friday, September 30, 2022

2022 Australia Dividend Post - First ever!

As mentioned previously, Poems offer a good screener that is pretty sufficient for our purposes as value investors looking for good stock ideas. Today, we look at Australia, one of the most attractive and yet under-rated markets globally. Australia is the world's 18th largest economy by PPP at c.USD1.8trn which is roughly 6x larger than Singapore's. It took the record for the longest stretch of uninterrupted GDP growth in the developed world (26 years from 1991 to 2017) driven by good policies, growth of its natural resource producers and its strong financial sector. It is also a fertile hunting ground for good value and growth compounders even if we just look at large caps above USD10bn.

Criteria used for ASX's screening

I have almost always used the same criteria for screening (partly due to the limitation of the screen) and the above shows what is being used for today's Australia screen. The criteria are simply ROE at 10%, ROA at 5% and operating margins (OPM) at 10% and we generated a pretty interesting screen. I have not used traditional valuations such as PER and PBR because it will cut out interesting names such as CSL, Cochlear and Resmed etc.

First section of 2022 ASX's screen

Valuation has evolved over the last 20 years and the way to value growth stocks might be to use Price to sales or PEG because traditional metric like PER and PBR does not work for the super growth companies we have seen like Tesla, Amazon. We also have a few of those in Australia shown on this first section. Aristocrat is one of the largest gaming machines maker and has compounded well over the last 20 years. Australia also has some of the most interesting healthcare names in the world. Cochlear is the company that invented ear implants and cure deafness. If Helen Keller was born in this era in Australia, she would be able to listen and speak. Then she may not become Helen Keller, but that's besides the point. Cochlear has the ability to ensure that no babies will be deaf since its founding, unfortunately government policies and restriction continue to inhibit this reality even though we already have the technology.

Second section of 2022 ASX's screen

The second section has James Hardie, a homebuilder that has compounded double digits for decades and Resmed, another world class healthcare company that cures sleep apnea. But what is worth highlighting today would be Woodside Petroleum. This is one of the pure LNG listed companies that has gone from strength to strength. With today's energy prices soaring, Woodside will continue to benefit. It should have been bought out by big majors but somehow it never happened. Now that is has grown to become a USD 60bn company, it might be too big to swallow, but we never know. Energy security will be ever more important. So glad I kept my global energy names all these years.

As usual, here's the past lists:

Huat Ah!

Thursday, July 07, 2022

2022 SG Dividend List

We are at a good time to look at the annual dividend list again and as market cycle goes, we are back in the doldrums and therefore see a lot more names just in our beloved little red dot. The criteria have to be added so that we can down to a manageable list.

For the first time in a long while, I used the PE cap to limit the number of names. I put a cap at 20x meaning that any stock trading at more than 20x will be cut out. Surprisingly, I still get so many names that we need have two lists below (ranked by market cap). This year, we see a lot of property names and new names which, to be honest, I have not studied and would not be able to comment.

At the top of the market cap range, we start with Thai Beverage at close to SGD18bn market cap. I have owned this name for a while and I believe this is perhaps one of the rare compounders we can find on SGX. The numbers speak for themselves, double digits margins and double digit ROEs. I would argue that at 16x price earnings, this name is not expensive. Top Glove of Malaysia is another superb company but the numbers do look strange with ROE over 100% and dividend over 20%. That said, we know its strengths and kudos to the managers who brought the company to such global success over time. Alas, both of these strong names are not home grown Singapore companies.

The second part of the list goes down the market cap and again, there are many unfamiliar names. But one familiar one did stand out - Bukit Sembawang. This is a well-known property play currently trading below book but with ROA at 10% and ROE at 13.5%. It also offers a decent dividend yield of 6.5%. On surface, it definitely looks like a good bargain. Perhaps someone will take them out like what happened with SPH and SPH Reit.

Next up, let's see if we can find more interesting names in the other markets!

As usual, here's the past lists:

Huat Ah!

Monday, September 20, 2021

2021 HK Dividend List - Bonus!

Hong Kong and China has matured as stock markets over the last 20 years. In 2005, Jim Rogers famously said that the 21st Century belongs to Asia and China, especially, which was awakening to capitalism after years of structural reform. The big beneficiary was the Hong Kong's capital markets. Shortly after, China went ahead to drive the commodities supercycle, became the world's largest exporter and now on its way to become the world's largest consumer market. Yes, we will continue to see the growth of China.

2021 HK dividend list

This is the first list of interesting HK and China names and we see the corollary from the preamble above. Anhui Couch, China's second largest cement company and China Resources Cement were the Chinese companies that drove the commodities boom. Alongside was Zoomlion, the excavator manufacturer, helping to build up China's infrastructure over the last decade. Qingdao Port, an execution arm of China's export capabilities and Haitian, one of the plastic injection mold companies benefiting from the export trend. Then we have a bunch of consumer companies like Want Want and Uni-President which will be compounding growth in the years ahead.

ROE and ROA driven screen

The criteria are similar to the Singapore list generated a few weeks ago whereby ROA and ROE drives the screener. The first part of the list shown here cuts off at market cap of HKD 35 billion (c.USD 5 billion) which is good. We do not like companies with small market caps as it's just risky. Remember Singapore only has less than 30 companies with more than USD 5 billion in market cap. That said, if we have done good analysis and are confident that they won't go belly up, it is okay to buy small caps. Those are the names that can give 10x returns (except Hyflux, which was USD 1 billion when it went belly-up).

If I were to pick one name from this list, it would be Want Want. We know that snacks are irresistible, the market will grow at high single digit and Want Want has the track record to keep growing. The metrics look pretty good too. ROE at 24% and ROA at 12% and operating margins are over 20%. Most importantly, the stock is not expensive at teens PE. However, the screen is always just the starting point. We must do more work. The stock price has collapsed from its peak and not moved for a couple of years. We need to find out why.

That's what screens are about. We use screens for a first cut and then do the deep dive. It is hard work!

As usual, here's the past lists:

Huat Ah!

Saturday, August 21, 2021

2021 Singapore Dividend List using Poems Stock Screen

When we first starting discussing screens more than 10 years ago, there were no good screens out there for retail investors. But technology advances, today we can easily screen for stuff. Just google "stock screener" and you get tonnes of screens. Even screens for ETFs! It is true that most would be made for the US and other big markets. But still, you can get good stuff.

I have been using poems as described in last year's post. This year, I would also be showing the poems screen. Singapore has been hit badly by the pandemic and we do get a lot of interesting results. So, this year's screen will be the first time in a long while we discuss Singapore stocks.

Here's the criteria I used for this year's screen.

I have focused on ROE and ROA (which are proxies for ROIC or return on invested capital) for this year to as these two metrics are really key in assessing both the quality of the business and the quality of the management. ROA of 10% means for every $100 I invested into the asset base of the business, I will get back $10. This is a decent return for most businesses when it's sustainable.

As such, I would say that ROE and ROA drive the screen, while Operating Margin, Dividend Yield are really just cherries on the pudding. Remember, while we are looking for good dividends, it is what makes good company capable of paying good dividends that is important. Lastly, I have the market cap cut off at SGD100m.

These are the names ranked by market cap: Thai Beverage at SGD17.5bn, ST Engineering at SGD12.2bn and Keppel and so on and so forth. Nothing really stands out in this first part. Some of the names are repeated from last year as well while some others dropped off (Jardine Cycle and Carriage and SIA Engineering) mainly due to their inability to maintain paying 3% dividend. I continue to own Vicom which was discussed a couple of years back.

First part of Singapore's 2021 Dividend List

The second part of this year's Singapore screen have a few interesting names: Boustead, Silverlake and Propnex. All three names generate extremely high ROEs without using too much leverage. We know this because ROA is also good at high teens. Most importantly, valuations are not stretched. Silverlake Axis trades at 4.6x PER!

That said, Silverlake Axis was issued with a short seller report back in 2015 which caused the stock to crash after that. It never recovered. It has been 6 years now but nothing was ever brought to light. So, did they really commit accounting fraud? If so, then the regulators should have clamped down and got the company delisted. If not, why is the stock price so weak after so many years? Inexplicable. In such cases, perhaps it is easier to just stay away.

If anyone have any insights, would love to hear more in the comments section.

Second part of Singapore's 2021 Dividend List

I do not own any of these names. So Silverlake is not so great but I have been told many times that Boustead and Propnex are good companies. Boustead was built by a legendary entrepreneur called FF Wong. It was a darling midcap until 2014 when it's share price was almost two dollars. It has since derated quite a bit. I have not looked at it recently, but if its core engineering services business is not being disrupted, it should do okay.

Propnex is just the right business in the right place. Singapore's national pastime is to buy and sell properties. This stock IPO at 50c and is now at 1.5. How I wished I took my friend's advice to look at it seriously back then. It is after all the largest property agent in Singapore. It is not shown here but this is a highly FCF generative business making SGD30-40m against its market cap of SGD500+m. What's more: it has SGD100+m in cash and no debt. If it corrects 20%, I think this is a buy.

As usual, here's the past lists: