Posted by kcchongnz > 2013-06-08 06:08 | Report Abuse

Let me start with a high dividend yield strategy with Pintaras Jaya. Please bear with me for using Pintaras as an example again as an easy way out because I have readily available data for it.

Note from the following table that dividend has been growing steadily at a CAGR of 15% from 10 sen in 2007 to 20 sen last year. My expected dividend for 2013 is 23 sen per share. At the close of market on 7/6/2013, the dividend yield worked out to be 4.8%. This is higher than the FD rate and meeting the first criteria. Hence Pintaras may be a good candidate for this strategy. With a payout ratio of 38% last year which is way below 65%, it meets criterion 2. There will be more than enough money retained for capital expenses, and hence prospective future growth. In actual fact, Pintaras is able to distribute even higher dividend without adversely affecting its growth. This can be deduced from its last 5 year CAGR of 16% in net profit as shown in the table below.

Not to forget that on top of all these, Pintaras is a debt free company and has an excess cash RM153m or RM1.91 per share in its balance sheet.

So don’t you agree that Pintaras is a prospective candidate for the strategy of investing basing on high dividend yield?

Year 2012 2011 2010 2009 2008 2007 CAGR
Revenue, m 185 126 106 130 165 147 5%
Net profit, m 42 26 21 16 26 20 16%
EPS, sen 53 32 26 20 33 25 16%
Dividend per share, sen 20 19 15 10 12 10 15%
Payout ratio 38% 59% 58% 50% 37% 39%

Posted by pillay15 > 2013-06-08 06:41 | Report Abuse

Thank you very much kvchongnz. Excellent piece of write-up. Really appreciate your content and most importantly use of good English- no short forms and no grammatical mistakes. Makes reading your write-up a pleasure. Very clear that you had done your homework well.

Some companies consistently pay dividends which are slightly higher than the FD rates.MBSB and Halex are 2 examples. Some of the companies provide door gifts and also food vouchers. That is a very small amount but if you take that into consideration, you will see a better return.From example Maybank gave RM40 KFC vouchers. Takaful gave last year RM100 but this year nothing. BIMB (Bank Islam) gave a RM100 Giant voucher.Carlsberg gave RM40 discount voucher to buy its beer from Giant. Many others are there too. If you need any further information, let me know as the next 3 weeks is the peak for the AGMs. My advise is -genuine shareholders need to attend the AGMs and benefit from it. I always tell my friends. There are thousands of reasons to buy shares. Whatever the reasons, we respect their decision.

Posted by Micheal Teo > 2013-06-08 07:25 | Report Abuse

Hello...you can invest your money in Faber which is proposing 10% dividend or rm100.

Posted by houseofordos > 2013-06-08 07:31 | Report Abuse

Uchitec is one example of high dividend yield stock.. no doubt its earnings growth is not great but its 100% dividend payout policy is sustainable considering its strong cash position

Posted by faberlicious > 2013-06-08 11:51 | Report Abuse

Ah....dividends,my favourite subject. I always look out for stocks that pays a good dividend. Let's see, some high dividend paying stocks ; Uchitec,Wellcall,Skpres,Tienwah,Pintaras,Bjtoto,Hupseng,Zhulian,Amway,Presbhd,Maybank the list goes on and of course not forgetting the Reits. Look for companies with loads of cash on their balance sheet. When my aunt asked me any good stocks to buy or not I always tell her just buy the reits. They provide stable and regular income even though capital gain is slow. No need to monitor all the time. Besides the share price is less volatile. I even told her buy all the reits and you receive income every month(well almost every month). So go ahead, buying dividend paying stocks is a great way to build up one's cash pile.

Posted by kcchongnz > 2013-06-08 19:43 | Report Abuse

Is Uchitech meets the requirements of a high dividend strategy?

Posted by houseofordos > Jun 8, 2013 07:31 AM | Report Abuse
Uchitec is one example of high dividend yield stock.. no doubt its earnings growth is not great but its 100% dividend payout policy is sustainable considering its strong cash position

Uchitech distributed 12 sen per share as dividend for the last few years. At RM1.33, the dividend yield is extremely good at 9%, a very good company to invest in if one needs stable income each year from his investment.

UCHI Technologies Berhad is engaged in manufacturing of mixed signal microprocessor-based application and system integration products, and trading of complete electronic module and saturated paper for printed circuit board (PCB) lamination.

The business is definitely a good business. In fact Uchitech was doing extremely well before the sublime crisis in growth and profitability. Revenue was 157m in 2007 and EPS of 21 sen. It was hard hit by the crisis in 2008. Since then it never seems to recover to its glory days. This is probably because its big clients are mostly in Europe which the economy has been in doldrums for a long time. Revenue and EPS has dipped to 92m and 12 sen in 2012.

Uchitech distributed all its earnings as dividend with no reinvestment (except for last year) and hence no growth. Hence it doesn't satisfy criteria 2 and 3 below as a high dividend strategy.

1. Dividend yields exceed the bank fixed interest rate, currently about 3.5%.
2. Dividend payout ratio should be less than a cut-off, say 65-80% to have growth
3. Reasonable growth rate in earnings at least matches the overall economy, say >4%.

Posted by houseofordos > 2013-06-08 20:11 | Report Abuse

kc, one can look at it the other way, a stock yielding a high dividend yield wont stay at the same price forever, we saw this pre-GE where defensive stocks like REITs were bought up till their yields were compressed. So in a way buying a high yielding stock at the right price does envetually translate to capital gains + dividend yield in times of uncertainty.

Posted by FCM100 > 2013-06-08 22:59 | Report Abuse

Mind to provide an analysis on Hapseng?

Posted by aunloke > 2013-06-08 23:55 | Report Abuse

Liihen,
div. for 2010,2011,2012 :- 14.5 ,8 and 12 ( will pay 4sen interim div. for 2013 and extra 3 sen for final 2012 div. next month so that for the year 2012 the total should be 15 sen ). Earning quite good ,can see from the low PE of less than 5 and the pay out ratio is about 40-50%. At the moment market price is 159 cum div. of 7 sen.

Posted by gordan85 > 2013-06-09 02:33 | Report Abuse

thank you kc, as FCM100 said, do you mind to comment on hapseng?

Posted by kcchongnz > 2013-06-09 06:44 | Report Abuse

Is investing in Lii Hen fit the high dividend investment strategy?

Posted by aunloke > Jun 8, 2013 11:55 PM | Report Abuse
Liihen,
div. for 2010,2011,2012 :- 14.5 ,8 and 12 ( will pay 4sen interim div. for 2013 and extra 3 sen for final 2012 div. next month so that for the year 2012 the total should be 15 sen ). Earning quite good ,can see from the low PE of less than 5 and the pay out ratio is about 40-50%. At the moment market price is 159 cum div. of 7 sen.

Lii Hen Industries Berhad (LHIB) is engaged in the manufacture of furniture, and processing and kiln drying of rubber wood and timber. It exports most of its products overseas.

Lii Hen is definitely a high dividend stock. At RM1.59 per share and dividend of 14.5 sen as stated by aunloke, the dividend yield is 9.1%, three times that of FD rate. The dividend payout ratio is also quite low at 41%, leaving plenty of money for capital expenses for future growth (hopefully it is used for future growth and not wasted away). The cash flow coverage of 2.2 times is also good.

But did the reinvestment yield reasonable growth for Lii Hen? Yes indeed if you look at its long-term trend. Growth in revenue and earnings are both in double digits. Hence Lii Hen meets all the requirements below as an investment for a high dividend strategy.

1. Dividend yields exceed the bank fixed interest rate, currently about 3.5%.
2. Dividend payout ratio should be less than a cut-off, say 65-80% to have growth
3. Reasonable growth rate in earnings at least matches the overall economy, say >4%.

I thought I read something about something not good about Lii Hen in corporate governance issues on some kind of manipulation by the insiders. Can anyone enlighten?

Posted by arv18 > 2013-06-09 06:53 | Report Abuse

Felicity mentioned this along with Latitude Tree, Homeritz, Classic Scenic (which i have owned in the past). Any comment on Lii Hen as a pure play on US housing recovery in light of the positive NFP report?

Posted by kcchongnz > 2013-06-09 11:14 | Report Abuse

arv18, I don't know much about the US housing market. Felicity has talked about it quite extensively in his report you mentioned. That is one of the best source of independent information and view point. Of course if the positive report is true, there is heaps of opportunity for company like Lii Hen. But again one may be unwise to rely too much on any positive report for that matter. Just like the previous sublime housing crisis, few people took the heed of the housing bubble just before it burst.

As far as investing in Lii Hen is concerned, whether one is using the high dividend yield strategy as discussed in this thread, or a strategy for high growth stock, or even the value investing strategy (the Cold Eye 5 yardsticks), Lii Hen remains a stock to invest in all these strategies.

I only concern about the corporate governance, the credibility of its management and manipulation of insiders, if any, which I am no knowledge about. I am still awaiting for input on these from others.

Posted by aunloke > 2013-06-09 12:17 | Report Abuse

If Bjtoto is good then Bstead is better.

Posted by kcchongnz > 2013-06-09 12:33 | Report Abuse

Good to have feedback from many people here. However, if you read my post at the top, i mentioned that investors should concern about the total return of their investments, not just the dividend yield, which is just part of the total return. I also mentioned that "Research studies in the US market concluded that while raw returns from buying the top dividend paying stocks is higher than the index, adjusting for risk and taxes eliminates all the excess return". This could be due to the low capital reinvestment and hence lower or no growth for the company. I also showed some high dividend stocks in Bursa actually result in investors losing huge amount of money.

So I would appreciate that when you recommend a high dividend stocks, first check the criterion number 1 since you are interested in high dividend:

1. Does the dividend yields exceed the bank fixed interest rate, currently about 3.5%.

In order to check that the company does not pay too much dividend and sacrifices capital reinvestment and resulting in slow or no growth, check criterion no.2 below:

2. Dividend payout ratio should be less than a cut-off, say 65-80% to have growth.

Then what do you think whether there is any growth in the future for this company which pays high dividend by checking criterion 3 below:

3. Reasonable growth rate in earnings at least matches the overall economy, say >4%.

So a high dividend yield strategy has to meet all the three criteria above before the stock is a good candidate. Please show your reasoning about the stock meeting all the above criteria, if you can. It is hard for just one person to do all these.

Posted by aunloke > 2013-06-09 13:55 | Report Abuse

That's why I mentioned LIIHEN instead of BSTEAD which has very high pay out ratio because of LATA's need but the growth may not be significant. I'm not sure about the credibility of Liihen management , normally I consider the willingness and the ability of the management to pay the share holders as a rough guide line, since year 2010 to 2012 , it has paid a total of 20.7M to the share holders and is going to pay 4.2M more next month. the market cap. is only 117M and with its ability to pay such an amount is worthwhile to consider.

Posted by Charles Ang > 2013-06-09 14:19 | Report Abuse

Just want to mention that Faber par value is 25 sen and not 1 RM. Therefore 10 sen div. is way above 10%. As for yield on current price , is around 18% ,damn good. Sustainable? Turn around stock?

Posted by kcchongnz > 2013-06-10 18:25 | Report Abuse

does Hap Seng Consolidated meets the requirements of a high dividend yield strategy as mentioned in this thread?

Posted by gordan85 > Jun 9, 2013 02:33 AM | Report Abuse
thank you kc, as FCM100 said, do you mind to comment on hapseng?

Hap Seng paid a dividend of 10.5 sen last year. It is expected that the dividend payment will be the same of higher this year. Hence the dividend yield is 0.105/1.96=5.4%, higher then the FD rate of 3.5%. Hence Hap Seng meets the first criterion, ie

1. Does the dividend yields exceed the bank fixed interest rate, currently about 3.5%.

As Hap Seng earns 19.6 sen last year, the dividend payout ratio

b=10.5/19.6=54% which is less than the criterion as stated below:

2. Dividend payout ratio should be less than a cut-off, say 65-80% to have growth.

Hence it is assumed that adequate amount of money is spent on capital expenses, and hence future expected growth.

I don't know what is the expected growth rate of Hapseng for the next 5 years. That is the job of analysts to analyze and find out. However from the past 5 years, Hap Seng's revenue and profit has been growing at a CAGR of 6% and 8% respectively which meets the third criterion below:

3. Reasonable growth rate in earnings at least matches the overall economy, say >4%.

Hence overall Hap Seng meets all the three criteria as a stock for the high dividend yield strategy stipulated by me.

Posted by kcchongnz > 2013-06-11 14:26 | Report Abuse

Does Berjaya Toto meets the requirements of a high dividend yield strategy?

Posted by Hafiz Millip > Jun 9, 2013 11:57 AM | Report Abuse
Buy bjtoto lar for dividend and stable price...no brainer....bjtoto get tons of money everyday....from gamblers...

Posted by Hafiz Millip > Jun 9, 2013 12:03 PM | Report Abuse
Bjtoto give above 20 cents dividend for the past donkey years....in fact you already get back your capital and enjoy the dividend by now....cash cow one....no neec to kanchong2 play stock...

Everybody seems to think that a high dividend payment company is a great investment. Why not? Look at Berjaya Toto. Pay high dividend every year. "Investors already got back their capital in a few years." Is it really true that Berjaya Toto is so good.

I must emphasize here again that dividend forms just part of the return for investing in a company. The other part is the capital gain on the stock which comprises of earnings growth and expansion of the price-earnings ratio when it is sold later. Together they form the total return of a stock.

Total return = Dividend + Capital gain (Earnings growth + PE change)

Below I have summarized the total return of each period and the compounded annual return for each holding period for BerJaya Toto since 5 years ago. Judge yourself if this high dividend yield was a good investment.

BJToto 4.36 11/06/2013
Period 2-week 6-month 1 year 2-year 3 year 4 year 5 year
Price 4.18 4.39 4.20 4.18 4.10 4.55 4.43
Return of stock 4.3% -0.7% 3.8% 4.3% 6.3% -4.2% -1.6%
CAR 199% -1.4% 3.8% 2.1% 2.1% -1.1% -0.3%
Dividend 6.1% 5.0% 3.9% 8.7% 4.9%
Stock price appreciation 199% -1.4% -2.3% -2.9% -1.8% -9.8% -5.2%

Posted by Victorchan > 2013-06-11 23:04 | Report Abuse

Thanks for the info,i will accumulate Hap Seng ,as long as the p/e not exceed 15 or may be 18

Posted by kcchongnz > 2013-06-12 07:16 | Report Abuse

Does Boustead fit the high dividend yield investment strategy?

Posted by aunloke > Jun 9, 2013 12:17 PM | Report Abuse
If Bjtoto is good then Bstead is better.

Boustead paid a dividend of 36 sen last year with a dividend yield of 6.7%. This is about twice one can get from FD. So Boustead is definitely a good investment, or is it? Below is the summary of the short and long -term total return for Boustead:

Bstead 5.39 11/06/2013
Period 2-week 6-month 1 year 2-year 3 year 4 year 5 year
Price 5.34 4.98 5.20 5.60 3.40 3.40 4.10
Return of stock 0.9% 8.2% 3.7% -3.8% 58.5% 58.5% 31.5%
CAR 27% 17.1% 3.7% -1.9% 16.6% 12.2% 5.6%
Dividend 6.9% 6.4% 6.1% 5.4% 4.4%
Stock price appreciation 27% 17.1% -3.3% -8.3% 10.5% 6.9% 1.2%

As you can see, the total return of Boustead is not really that impressive after all. For example, though its three and four year compounded annual return of 16.6% and 12.2% is just comparable to the return of KLCI, its 1, 2 and 5-year CAR of 3.7%, -1.9% and 5.6% respectively is way underperformed the market. Another disappointment for a high dividend yield stock.

Boustead share price performance is better than Berjaya Toto though as the shareholders of BJToto join Julie London and sing "Cry me a river" below:

http://www.youtube.com/watch?v=_iMTN1YS7H4

Posted by arv18 > 2013-06-12 08:25 | Report Abuse

Thank you very much sir. Entry is going to be the tricky part. I really would like that gap to close in KLCI pronto (i'm also curious as to how resilient my portfolio is going to be when it happens).

I've noticed how the share price of most manufacturing/exporting companies have reacted positively to the weakening USD, since that NFP report, and the noises being made about "tapering" - whatever that means.

Have you looked at Prolexus (just curious). I glanced at it and wrote it off. Lumpy earnings, with pie-in-the-sky projections of 33% ROE from RHB. Latitude Tree, with its low ROE, also didn't pass the sniff test.

Posted by kcchongnz > 2013-06-12 08:46 | Report Abuse

arv18, again this thread is about a investing strategy on high dividend stock. As Prolexus only pay a dividend of 3 sen, and at 2.12, the dividend yield is just a pittance of 1.4%. So it does not fit here. However somebody did ask me about this stock in my thread of investing in a growth stock, "Do you have a valued growth stock?". I posted my reply as follow. appreciate your feedback.

Posted by kcchongnz > Apr 9, 2013 05:22 PM | Report Abuse X

Prolexus A growth stock?

The table below shows the 6 years revenue and earnings of Prolexus for the financial years ending 30th June. It doesn’t show that it is a high growth company in terms of revenue. It made losses in 2006 through 2008. However, after the disposal of some loss making investment in 2008, Prolexus made a turnaround. Its revenue grew at a CAGR of 8% from 2009 to 2012. Its EBIT surged by 45% a year for the three years from 2009 to 2012. The growth in EBIT and net income last year was 90% and 80% respectively. That would qualify Prolexus as a high growth company. Thanks to the growth in its garment manufacturing.

Year 2012 2011 2010 2009 2008 2007 2006
Revenue 189498 184464 136875 149998 166774 181527 174840
EBIT 11213 5886 6601 3694 -149 -2958 -1066
Net Income 10568 4906 3403 262 -2892 -5869 -1976

Prolexus closed at 1.33 on 9th April 2013. With a EPS of 28 sen per share, the PE ratio is about 5 (<<10), PEG is also very low at 0.2(<<1), a P/B of 0.9 (<1.5), and a dividend yield of 2.3%. Hence Prolexus is not only a growth stock, it is also a value stock in every aspect.

A high growth stock has a major concern; that is if the growth adds value to the firm. Growth is considered shareholder value enhancing if the growth in earnings exceeds the weighted average cost of capital of the firm. With a return of total capital of 15.2% and ROE of 16.2% last year, it has clearly demonstrated that the growth is shareholder value enhancing.

For the half year ending 31/12/2012, Prolexus has already made a net profit of 22.3 sen per share, 64% more than the same period the previous year.

So is Prolexus a free lunch for investors; one with high growth and yet selling at a very cheap price?

Posted by arv18 > 2013-06-12 09:39 | Report Abuse

Its funny. You rarely if ever see a company turnaround on Bursa. Digi did it, only after Telenor stepped in. Lately CMSB has had a massive run up (it hit a high of 15.15 sometime in 1996/97), and now Prolexus.

Taking into account the split that happened June 2000, this stock has still not returned to its IPO price, or even close to the high it hit of 6.69 in 1997 (ft.com).

But to get to your questions...more questions. Is this growth sustainable? It just seems so phenomenal. How are they able to achieve these numbers in such a cut-throat environment? What are they doing that is so special? I know that they've been supplier Nike for a long time, but what has so dramatically changed?

Posted by necro > 2013-06-12 10:13 | Report Abuse

Have a look on GTRONIC...

Posted by Johari > 2013-06-12 16:34 | Report Abuse

yes GTRONIC will give you at least 7% yield this year with 20% growth in earnings. No brainer.

Posted by kcchongnz > 2013-06-13 12:48 | Report Abuse

Does Globetronic fit in a high dividend strategy?

Posted by necro > Jun 12, 2013 10:13 AM | Report Abuse
Have a look on GTRONIC...

Posted by Johari > Jun 12, 2013 04:34 PM | Report Abuse
yes GTRONIC will give you at least 7% yield this year with 20% growth in earnings. No brainer.

Globetronic paid out a dividend of 46m, or 17 sen per sharelast year. At 2.08 now, the dividend yield is 8.2%, more than twice the FD rate. Yes Globetronic is definitely a high dividend stock. But does it meet the requirement of a high dividend investing strategy?

Globetronics earned 41.3 m last year. Hence the dividend payout ratio is 46/41.3 or 110%. This means that Globetronic dug into its cash in its balance sheet to pay the dividend which is more than what it earned last year. It has an excess cash of 106 m in its balance sheet as at 31/12/2012. So unless Globetronic can make much more money than last year, its high dividend may not be sustainable. Don't forget that in order to maintain its competitiveness, it also has to spend money for capital expenses.

Although its compounded annual earnings growth for the last 4 years is ok at 17% a year, its revenue growth is not impressive at all at only 1.3% a year. High earnings growth without the corresponding growth in revenue is also not sustainable.

Hence for me, Globetronics doesn't fit in my high dividend yield strategy.

Posted by arv18 > 2013-06-13 14:48 | Report Abuse

Thanks mate. Looks like that pull-back is finally here. The sooner the election gap closes, the better.

Posted by Joshua Lee > 2013-06-13 14:52 | Report Abuse

"Although its compounded annual earnings growth for the last 4 years is ok at 17% a year, its revenue growth is not impressive at all at only 1.3% a year. High earnings growth without the corresponding growth in revenue is also not sustainable."

KC, perhaps the small revenue growth compared to the big earnings growth is due to Gtronic moving to higher profit margin products?

Posted by kcchongnz > 2013-06-13 17:42 | Report Abuse

Joshua,
You may be right. Very good point. Its earnings grow may be due to higher value product.

The surge in net income actually just happened last year when NI jumped from 26.7m to 41.3m (actually about 35m, the rest from sales of assets). The management discussion did mention about "better product mix". In the future, sales has to increase too to maintain that kind of growth.

Actually Globetronics is capable of distributing that 17 sen dividend last year because it has 106m cash and no debt at all. More debt can be assumed and cash obtained from debt can be distributed as dividend too. However for this high dividend to continue, it really has to earn much more in the near future as it pays out more than it earns last year. Moreover, it needs money for capital expenses which they acknowledge that it is necessary as shown in their statement below:

"Moving forward, the Group will continue to focus on escalating up the value chain and riding on the R&D initiatives in new products’ design and development."

Posted by kcchongnz > 2013-09-01 18:02 | Report Abuse

Prestariang has just reported its 2nd quarter 2013 results. Both its revenue and net profit increased by 16% compared to the corresponding quarter the previous year.

Prestariang paid out a total 10 sen dividend last year. At a price of RM1.92 now, the dividend yield amount to 5.2%. This yield is much higher than the fixed deposit rate of about 3.5%. So it appears that Prestariang fit in our high dividend yield strategy, doesn’t it?

Prestariang’s dividend payout has increased from 8 sen two years ago to 10 sen. This is equivalent to a very good compounded annual growth rate of 12%. It earned 17 sen a share last year. The payout ratio is less than 60%. Hence it has retained a healthy amount of earnings for capital expenses intended for growth in the future.

Prestariang’s business is stable with recurring and growing income from its ICT Training & Certification and software licence distribution, mainly from the government departments. Its education arm UniMy, presently running at a small loss, would soon begin to contribute to its bottom line. It has ample free cash flow due to its asset light business model. Last year, FCF was 38.4m, or 17.4 sen per share. It has a very healthy balance sheet with an excess cash of 63m, or 28 sen per share.

With all these, there is no reason why Prestariang would not be able to continue to pay out high dividend in the future.
Prestariang certainly qualifies as a stock for the high dividend yield investing strategy.

Posted by vinext > 2014-08-26 06:42 | Report Abuse

only 4-5stocks gave 10%yield or more in last 10yrs of 2001 to 2011
,they are uchitech,yilai,and i think harrisons,
cant remember the other 2