Due to the recent correction of the stock market, some blue chips shares are giving a high dividend yield. A telco, Starhub now gives a yield of 7%. The media company SPH pays 6.1%. This is the dividend paid during the past 12 months, expressed as a percentage of the current share price.
The stock market has corrected during the past month due to uncertainty in the global economic environment. When the global economy turns bad, the profit of companies are expected to drop. In a bad situation where the profit profit drop by 50%, the dividend yield will still be more than 3%, which is quite attractive compared to bank deposits and bonds.
The share price may drop sharply during a very bad market. But, if you are investing for the long term and does not have borrowings, you can afford to wait for the stock market to recover. There is no need to sell the shares in a bad market.
Investing in high dividend shares make sense in this uncertain market. Before you invest, you should study the borrowings of the companies. If they do not have large borrowings, you will be quite safe. If there have large borrowings, i.e. high leverage, they may be badly affected by a downturn in the economy.
You should still diversify your investments by spreading the total invested amount into 5 to 10 blue chip shares. If you do not have sufficient funds to diversify in this manner, you should invest in the Straits Times Index ETF managed by SPDR or DBS.
The stock market has corrected during the past month due to uncertainty in the global economic environment. When the global economy turns bad, the profit of companies are expected to drop. In a bad situation where the profit profit drop by 50%, the dividend yield will still be more than 3%, which is quite attractive compared to bank deposits and bonds.
The share price may drop sharply during a very bad market. But, if you are investing for the long term and does not have borrowings, you can afford to wait for the stock market to recover. There is no need to sell the shares in a bad market.
Investing in high dividend shares make sense in this uncertain market. Before you invest, you should study the borrowings of the companies. If they do not have large borrowings, you will be quite safe. If there have large borrowings, i.e. high leverage, they may be badly affected by a downturn in the economy.
You should still diversify your investments by spreading the total invested amount into 5 to 10 blue chip shares. If you do not have sufficient funds to diversify in this manner, you should invest in the Straits Times Index ETF managed by SPDR or DBS.
9 comments:
Dear Mr Tan,
What do you think of K-Green thrust as a divident stock ?
Sorry, I am not familiar with the fundamentals. Can you post your views?
Sir,
In the past I lost a lot in shares because I was the opportunist, I bought for the sake of buying almost everyday. When the stocks fell, I had no sufficient money to hold, then I lost a lot.
Your suggestions are good, thanks.
The strategy that works for me in investment: always buy good stocks and buy those stocks at a discounted price.
Judging from the comments made here, I guess everybody here invest on a "fundamentals" basis.
I'm from the "dark side of the Force" since I use technical analysis.
A long term indicator I use signaled in mid-August 2011 that the market conditions now favour a short selling strategy.
The last time this indicator sent a similar bearish signal was in Feb 2008.
I'm not saying the market is going to crash. I'm just telling you that technical analysts see the current stock markets a little bit differently from you at the moment.
Full disclosure:
I sold short the S&P 500 ETF (SPY) last week Friday.
At the moment I see only 2 "investment" choices. Stay in cash or sell short any market rallies.
Fear is a stronger emotion than greed. That's why markets go down faster (percentage-wise) than they go up.
Peak-to-bottom averages about 18 months.
Bottom-to-top averages about 30 months.
You don't have to agree with me. I'm just offering you a viewpoint that you may want to investigate further on your own.
Keppel Green – focused on green assets like incinerators and wastewater. high dividends at above 8% at current price. Currently no leverage. More info here:
http://www.kgreentrust.com/
@Anonymous 1:33 AM
Seems to be consistent with market watchers & anaylsts in China.
M1 and Starhub pay good dividends as well. Good to buy then when price is low.
This blog article gives good advice. Have followed it myself. If you have enough money, spread out the purchases over months. This downturn may go down further and unlikley to spring back up so quickly. As one earlier comment said, down and up takes some time.
One of the STI ETF's gives good dividends of about 3% under normal share prices. With the low prices now, may be worth buying.
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