Fundamental Analysis Workshop Series Session Five – Dividend Investing.
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Transcript of Fundamental Analysis Workshop Series Session Five – Dividend Investing.
Fundamental Analysis Workshop Series
Session Five – Dividend Investing
DISCLOSURES & DISCLAIMERSThis research material has been prepared by NUS Invest.
NUS Invest specifically prohibits the redistribution of this material in whole or in part without the
written permission of NUS Invest.
The research officer(s) primarily responsible for the content of this research material, in whole or
in part, certifies that their views are accurately expressed and they will not receive direct or
indirect compensation in exchange for expressing specific recommendations or views in this
research material.
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DISCLOSURES & DISCLAIMERSNothing in this research material constitutes a representation that any investment strategy or
recommendation contained herein is suitable or appropriate to a recipient’s individual
circumstances or otherwise constitutes a personal recommendation. It is published solely for
information purposes, it does not constitute an advertisement and is not to be construed as a
solicitation or an offer to buy or sell any securities or related financial instruments.
No representation or warranty, either expressed or implied, is provided in relation to the
accuracy, completeness or reliability of the information contained herein. The research material
should not be regarded by recipients as a substitute for the exercise of their own judgement. Any
opinions expressed in this research material are subject to change without notice.
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SYLLABUS
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SEMESTER 2
WK 2 • Introduction to Stock Investing
WK 3 • Art of Reading Annual Reports
WK 4• Picking the Right Stocks(Part I) – Top Down Analysis
WK 5 • Picking the Right Stocks (Part II) – Bottom Up Analysis
WK 6 • Picking the Right Stocks (Part III) – Dividend Investing
RECESS WEEK
WK 7 • Portfolio Management for the Retail Investor
WK 8 • Case Study 1
WK 9 • Case Study 2
WK 10 • Case Study 2
WK 11 • Traders Interview
Agenda
• Dividend Yield / Payout Ratio• Beta • Cyclical? Non-cyclical? • Visibility of earnings • FCF (Free Cash Flow)
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INTRODUCTION
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PROFILE
• NUS Invest Research Analyst - Property
• Year 2 BBA
• 2 years experience
• Pure Fundamental Analysis
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Measures for dividend stocks
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Dividend Yield
• Percentage of what company pays out a
year over price
• = annual dividend per share / price per
share
• “bang for your buck”
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Where to find? Basic Decrypting
Applying the Information
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Why so important?
• Some investors require minimum stream of
cashflows
• Invest in stocks with high, stable dividend
yields
• E.g. $1 dividend per year, for $10 share, yield
is 10%
Payout Ratio
• Amount of earnings paid out to
shareholders
• = Dividends per share / earnings per share
• E.g. $1 dividend per year, for $10 share,
yield is 10%
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Why so important?
• Sustainability of dividend
• Low ratio – earnings support dividend
• Smaller dividends easier to pay out than
larger dividends
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Beta β
• Measure of volatility, or systematic risk
• Of a security/portfolio compared to market
• 1.5 means stock is 50% more volatile than
market
• Found by regression analysis
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Why so important?
• Many utilities < 1, less risky
• High tech stokcs > 1, more risky
• Many high dividend stocks < 1, eg. SPH
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Non-Cyclical
• Defensive stocks not very correlated to
economic fluctuations
• Goods and services we always need:
• Utilities, household non-durables (eg. P&G),
Tobacco
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Cyclical
• Earnings depend on whether or not economy
is strong
• Strong – people spend on luxuries:
• Car manufacturers, airlines, furniture retailers,
clothing stores, hotels and restaurants
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Charting – which is cyclical?
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Visibility of earnings
• Extent which future projections are probable
• factors: regulatory uncertainty, price volatility
and weak economy
• Can also refer to presence in market –
dominant company greater visibility
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Free Cash Flow
• Operating CFs – capital expenditures
• Cash company is able to generate after
paying for asset base
• = EBIT (1-t) + Dep & Amrt – Change NWC -
Capex
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Why is FCF important?
• Pursue opportunities that add shareholder
value such as new products or acquisitions
• Earnings can be subjective but cash is real
• -ve cashflow is not necessary bad –
investments in capital
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Q & A
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THANK YOU!
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