Dividend paying stocks are the most popular investment products among Singaporeans to plan for retirement. After I published this article last week, many readers want to know what are the tools available to choose dividend stocks efficiently.
Gone with the days when you have to fork out big bucks before you can jump onto the wagon of stock investing, there are many FREE tools available to investors like us. I will show you how, in less than 5 minutes, you can use a much neglected free tool to filter dividend stocks listed in Singapore Exchange (SGX).
If you have a stock broker account, you will always be bombarded with a lot of “research” tools. Unfortunately, most of these tools are designed to increase trading activities.
If you believe buying stocks is to benefit from the company’s profit and growth and meant for long term holding, you should be more interested in the fundamental data.
Dividend accumulated along the years can be a huge asset to many. Can you believe someone’s unclaimed dividends held in SGX is $1.2 million ?
How to choose a high dividend paying stock
Simplicity is the ultimate sophistication. – Leonardo da Vinci
There are many ways of choosing a stock, but for most people, I believe a simple three-criteria process is a good start.
- Financial Analysis – To understand a company’s financial health
- Pricing Analysis – To check if the company is overvalued
- Risk Analysis – To check if the company is over leveraged and exposed financial risks.
How to use Stockfacts to filter high dividend yield stocks
Luckily, SGX provides a simple and FREE tool for this. Here is what you need to do. Go to www.sgx.com. select Company Information->StockFacts.
From here you can see, there are total 356 stocks listed in SGX.
The next step is to use “Search Criteria” to filter down the stocks. The system can only select up to 5 criteria, by default the options are:
- Total Market Cap
- Total Revenue
- P/E Ratio
- Dividend Yield
But to me, I am more concerned about profitability than revenue. And I am not particular about the company size as more often than not, you can find gems in under researched and neglected small companies.
So here are the criteria I set. You should adjust the figures to whatever you are comfortable.
#1. High Dividend Payout:
Dividend Yield is at least 4 percent so it is considered a high dividend stock
#2. Financial Analysis:
This is to check that the company is at least
profitable. I will set minimum Net Profit Margin to be 10%
#3. Pricing Analysis
Even if it is a good company, I am not interested in overbought companies. If a company’s price to earning or to book is too high, I will filter them out.
- P/E ratio < 20 times,
- Price/Book < 1.5
#4. Risk Analysis
Being conservative, I prefer the company has more equity than debt, so Debt/Equity Ratio less than 100% is used.
Evaluate the result
Finally, I will sort the result by Dividend Yield from high to low.
As you can see from the result below, majority of them are REITs or construction companies. No wonder Singapore REITs have been the darling of all the Income Funds .
Among the top 10 stocks, there is just one outlier Asian Pay Television Trust (S7OU). This is interesting, and it is time for you to study deeper about this counter.
Which stock to buy
As mentioned earlier, this method is just a starting point. The next step is for you to shortlist a few and put in more effort to research the stocks.
First of all, you should note all the data are based on last day information so it varies day by day.
Secondly, the financial information such as profit, debt and equity should not be taken at face value as these are accounting figures which can be questionable some time. (Remember recent Noble crisis and allegation faced by Olam and China Minzhong in the past?)
Thirdly, latest dividend is not indication of future dividends. Some company may not have consistent dividend history. The highest dividend yield counter Asian Pay Television Trust happens to be one of them
In my previous post. I have highlighted that you cannot choose a stock just because its dividend yield is higher, and most of the good high yield stocks have been discovered and the prices may be overvalued.
This means investing planning is far more crucial in the current market environment. As much as you don’t want your money to rot in the bank, you have to first decide your financial objectives, time horizon and risk tolerance before making any investment selections.
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Do you find this article useful? What are the other tools you use for stock selection? Share with us by commenting below.
About Ivan Guan
Ivan Guan is an entrepreneur, blogger, author and financial consultant.