Dividend
When a company has excessive of cash, the management could choose to re-invest them to expand the operation, or they could choose to repay some of their debts to lower the cost of interests, or they could choose to repay the share holders by dividend payout.
If a company could pay regular dividend, it is a form a passive income for long term investors. Generally conservative and long term investors prefer regular passive income from dividend. Dividend is usually taxable, but in some cases, tax exempted.
Ex-Date
The Ex-date is the date in which the amount of dividend paid out is deducted from the market share price. If a company announced a 5 cents dividend, its share price will be adjusted to 5 cents lower before the market opens on the Ex-date day.
Dividend Rate:
Dividend rate is not to be mistaken as Dividend yield. When a company is paying out dividend, they have two ways to announce it, either by stating the actual dividend payout, or by the percentage.
For example:
Maxis announced a 6 cents tax-exempted interim dividend, which means share holders will receive 6 cents of dividend for every shares they are holding.
Another examples, is Cocolnd, which announced a 5% of interim dividend. But what exactly is 5%? In fact, it is 5% of the PAR value, but not the share price. Since the PAR value of Cocolnd is 50 cents, and a 5% of 50 cents is 2.5 cent. Therefore, shareholders of Cocolnd shall receive a 2.5 cents of dividend for every share they are holding, and this is before income tax.
Dividend Yield
Dividend yield is the total dividend paid-out divided by the current share price. Let's say, a company paid out 30 cents of dividend, and the current share price is RM 3.00, its dividend yield will be 10%. Please note that the dividend yield will increase as share price drops.
In analyzing companies in the same sector, investors could use dividend yield to select a company which has a better dividend payout. Say company A and company B both paid out a dividend of 10 cents, but the share price of A is RM 2.00, and the share price of B is RM1.00. Therefore, the dividend yield of A is 5%, while the dividend yield of B is 10%.
From dividend yield point of view, company B pays a higher dividend return. However, it is important to note that the most important feature of dividend yield is not only its high yield, but the consistency. When a company pay out dividend consistently, it means that their debts are well-managed, while still have excessive cash. Thus a safer company to investors for long term dividend income. Generally, when the dividend yield is higher than the conventional fixed deposite rate, or the EPF return, it is considered as a high yield stock. Below are some examples of high-yield stocks.
Table 1: Acostec – 7120, yearly Dividend, Dividend yield, and Net profit ratio.
As shown on table 1, Acostec has been paying dividend consistently, with its dividend yield up to 11.52%. Other than the year of 2002 which has a dividend yield of 3.16%, other yearly dividend yield has been consistently higher than 5.5%.
Table 2: BAT – 4162, yearly Dividend, Dividend yield, and Net profit ratio.
Among the counters listed in Bursa Malaysia, price of BAT is the highest, but its volatility is rather low. This is because its consistent high dividend yield, which is why long term investors are not trading it actively. As shown on table 2, the yearly dividend yield of BAT has been over 6%.
Table 3: GAB – 3255, yearly Dividend, Dividend yield, and Net profit ratio.
As shown on table 3, GAB has been paying consistent dividend of more than 6.27%, which is higher than the conventional fixed deposite rate, as well as the EPF return. Therefore, this is a type of favorable company that fund managers and long term investors.
Table 4: Maybulk – 2077, yearly Dividend, Dividend yield, and Net profit ratio.
If compared with the above 3 companies, the share price of Maybulk is more volatile. But its dividend yield is no less than the others. As shown on table 4, Maybulk has been paying out dividend for the last 6 years, with the recent years yielding up to 14.44%. This is also a high yield stock.
Table 5: Pbbank – 1295, yearly Dividend, Dividend yield, and Net profit ratio.
When talking about high dividend stock, Public Bank is never a stranger. Except for the year of 2002 and 2003, which have a dividend yield lower than 4%, others yearly dividend yield has been higher than 6.29%, and 2004 was 12.68%
When is the best buying timing?
Technically, the best buying timing for such high yield stocks are after a bear run, when the broad market has just rebounded. In other words, investors should always monitor these high yield counters, but should not buy then during a bear run.
Conclusion:
Other than looking for a high yield stocks, the consistency of dividend is more important. The consistency of dividend income is very suitable for long term investors and conservative investors, and when buying this type of high yield stocks, the best timing is to catch them after a bear run when the broad market rebound.
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