Wednesday, September 14, 2011

The Dividend Aristocrats; A List of Malaysian Public Listed Companies which give Solid Dividends

In these recent uncertain times, many commentators in the media have begun to promote the benefits of what we have always liked here at iInvest; Dividend Stocks. Companies which give steady dividends year after year are very attractive especially in tough times because they give something very tangible and real; Cash Dividends. When times are bad, growth stories go out the window; we just want to see cold hard cash from our investments.

However, many would protest that buying shares simply for dividends does not produce enough returns. With estimated dividend yields of only 5%-7% per annum, it is simply not enough to justify the risk of entering the stock market. But this train of thought only touches the surface. It does not take into account the following:-
  • Although current dividends divided over current cost gives 5-7%; remember that dividends increase over time. As the dividend of Company ABC rises from 10 sen per year to 20 sen per year; your dividend yield increases from 5% to 10% because you have locked in the cost now. Your dividend yield is 5-7% NOW; it is not expected to remain at this rate forever.
  • As dividends rise, the price of the shares will probably rise too, thus giving us very predictable Capital Appreciation (but you have locked in the cost while it was still low).
  • The ability to give dividends implies honest and capable management. A company which plays around with its finances will not be able to commit to giving out cash three to four times a year.
  • Strong dividends imply a solid business model. In other words, companies which are able to produce strong dividends are those which are making good money.

One complaint I always get is “Yes, we know Dividend Stocks are cool… But, how the hell do we identify which companies out of the hundreds listed on Bursa Malaysia actually give solid dividends?”

In the US, every year the S&P comes out with what it calls the "S&P 500 Dividend Aristocrats". This is a list of the best dividend companies which have to meet the following criteria:-
  • Minimum market cap of $3 billion.
  • Minimum average trading volume of $5 million to ensure liquidity.
  • Company must have increased dividends every year for at least 25 years.

Included in the list are stalwarts such as McDonald’s Corp, 3M Co., Coca Cola Co. and Exxon Mobil Corp.

Unfortunately for us, I have not come across such a list in Malaysia. But off-the-cuff, here are a few well-known dividend players in Malaysia which consistently provide steady, rising dividends:-
  • Amway (Malaysia) Holdings Berhad
  • Guiness Anchor Berhad
  • Carlsberg Brewery Malaysia Berhad
  • Public Bank Berhad
  • Sunway Reit
  • Capita Malls Malaysia Trust
  • Maxis Berhad
  • DiGi.com Berhad
  • YTL Power International Berhad
  • Petronas Dagangan Berhad

All the above companies have very strong business models which generate cash year after year. And all of them are growing quite nicely too.

Dividend stocks should have a place in any portfolio. You can even build your entire portfolio solely on dividend stocks.

What can be more fun than receiving cheques in the mail every quarter; correspondence which does not ask for money but instead actually gives you money?

“Do you know the only thing that gives me pleasure? It's to see my dividends coming in.” ~John D. Rockefeller


Andrew Chua
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2 comments:

  1. Good article..especiall this phrase “Do you know the only thing that gives me pleasure? It's to see my dividends coming in.” ~John D. Rockefeller

    ReplyDelete
  2. Haha. I bet you are regularly feeling the same pleasure too...

    ReplyDelete