Friday, August 28, 2020

2020 Dividend List

This year's dividend list is out! Dividend related topics have consistently been popular and this year we would like to introduce Poems screening tool to generate your own list. Poems have been one of the strongest Singapore brokers over all these years, despite it not being part of a bigger conglomerate. Perhaps, it's precisely because it's not part of any conglomerate that it understands what the small investors need.

Here's how the screener looks like (below). There are only a couple of factors to choose from, but it's good enough. For this year's list of Singapore stocks, I have chosen just a few criterias:

1. Market cap of more than a billion

2. ROA and ROE of more than 4% and 12% respectively.

3. Dividend yield of 3%.

Poems stock screener for SGX

This year's list is interesting given the backdrop of the global pandemic. While some global markets have recovered, Singapore has not. Many of our large caps are directly affected by COVID, like our beloved national carrier, and related to that, our aerospace names like ST Engineering and SIA Engineering (both shown here). Next, our oil and gas names are affected. With nobody flying and moving around, oil demand collapsed. Oil prices went negative in March! 

So, Keppel, Sembcorp and Sembmarine were impacted badly. They in turn hit our banks. With these names making up the majority of the STI, this could be why global investors shunned Singapore's stock market. Given our dependency on the big global players for export and trade and tourism, our economy and businesses are also impacted badly. But fear not, QE Infinity will save the day!

With or without QE, there are always interesting individual stock names. 

Jardine Cycle and Carriage is a stock discussed before. There could be an opportunity to buy here given it's now below its rights issue price in 2015! It went all the way to $47 and then collapsed during COVID, since no one's in the mood to buy new cars. The lesson to be learnt here is that Singapore, because of our environment, will have very few long term buy-and-hold stocks. I thought JCNC could be one,  unfortunately, it did not turn out that way. I am glad I took profit when it was doing very well. So, one has to truly stick to Ben Graham's philosophy of selling when these stocks are near its intrinsic values. 

Most of our Singapore names are not compounders, i.e. their intrinsic values do not go up exponentially. In fact, some of them do not go up. So we must sell when they trade near their intrinsic values and we buy only when there is a huge margin of safety to stocks' intrinsic values. Some of the names today might have that margin of safety today: Singapore Exchange, Thai Beverage. These companies have good business models and rarely trades cheaply. So at teens PE and 3% dividend yields, it's worth looking at more closely. 

Poems stock screener for NYSE

For the next list, we have our NYSE stocks. Poems allow for screening for a few exchanges and it is worth going through exchange by exchange. For the purpose of this post, I am doing just for NYSE. Using almost the same criterias, the screen churned out an interesting long list of names. Just to name a few: 3M (discussed here as well), Blackstone, Coca Cola and Kellogg. All of these give at least 3% dividend yield. 

So while markets are near all time high, there are still cheap interesting names. We are seeing the very similar dichotomy seen during the dotcom bubble. IT and tech names populated people's mindshare and old economy names were forgotten. Today, the FANGs stocks make up more than 20% of the US indices and Nasdaq is at all time high. Tesla, making 300,000 cars is bigger than Toyota making 10m cars. Meanwhile, interesting old economy names like 3M and Coke continue to generate 30-40% ROEs but are trading at significant discount to loss-making companies. 

Markets are as such. While they are efficient, they reflect the thoughts of all its participants and sometimes, these thoughts do not make sense. That said, we must always remember wisdom from the greats - John Maynard Keynes quote comes to mind:

"The market can remain irrational longer than you can stay solvent."

Don't bet the house on buying this list of names or go shorting FANGs or Tesla. Be prudent and do due diligence before betting. An investment operation is one, through analysis, provides capital protection and promises a satisfactory return. Anything else is speculation. Cheers!  

Huat Ah!

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