atans1

High-yield, low pay-out stocks are best

In Uncategorized on 10/11/2010 at 5:40 am

[Update-- read the first comment. Credit Suisse could be wrong]

In Singapore, investing in high-yield, low-payout stocks was the best-performing strategy over a period of 15 years says Credit Suisse. “Outperformers” are telco M1; rig builders Keppel Corp and Sembcorp Marine; transport group ComfortDelGro Corp; property developer Allgreen Properties; and conglomerate Sembcorp Industries.

These stocks have dividend yields of up to 6.3% (as of end October) a year and only pay out as little as one-third of their profits as dividends.

Other high-yield, low-payout stocks it mentions are Fortune Reit; and property companies MCL Land and United Engineers. These have dividend yields of over 3% a year but pay out less than a quarter of their earnings as dividends.

Why?

– “High-yield, low-payout essentially means you are buying yield stocks that are trading at a low price-earnings ratio’, or value stocks”. This strategy tends to outperform others in rising markets except in the bubble phase.

– A “low payout implies that these companies are retaining cash for growth which also helps long-term performance”. I never tot of this. Silly me.

– If things go wrong, the dividend yields could be sustained if part of the retained earnings were put into reserves (bit like S’pore’s reserves). This is my tot, not Credit Suisse’s.

About these ads
  1. I don’t know what those guys there are smoking…

    M1 pays out at least 80% of its earnings as dividend, not exactly low payout is it?

    Fortune REIT – as a business trust – has to pay out just as much – then how can its payout be less than a quarter?

  2. No.

    Well their study might be totally wrong. Thanks. I’ll put a health warning on the piece.

  3. You are welcome

    And a health warning…hahah :)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 199 other followers

%d bloggers like this: