Investing In A Stock For Its Dividend Yields II

I guess some people refuse to read or they cannot or they read only what they want to read or they lack the intelligence to understand simple English.

• SS said...
  You duk main tepi-tepi lubang everyday, so PER cannot use, Div Yield also cannot pakai, so how

In the posting Investing In A Stock For Its Dividend Yields

In my exact words again.

• Of course, these are 2 examples where investing a stock for its dividends failed. My point? Simple. I am not saying such an investing would not work and I am pretty sure many could provide me with full data where investing a stock for its dividends are proven successful. However, all I am saying is the investor should be careful. There are many incidents where such an investing can fail! The sustainability of the company's earnings is just as important. The reasoning is simple, without sustained earnings for the company, how could the company afford to continue paying so much dividends?

Perhaps I need to put in bold yet again: "I am not saying such an investing would not work and I am pretty sure many could provide me with full data where investing a stock for its dividends are proven successful. "

Perhaps some are mind less open and they simply refuse to want to see.

LOL!

So rather pathetic, yes?

Anyway, let's not waste time on such small ones.

In that blog posting, I made 2 assumptions. Yeah, ass-u-me is ass-u-me is assume. Let paste it here again "Firstly, a buyer for Uchi its dividends in 2007 will be in between Jan to April 2007. Lowest traded price of Uchi then was 2.98. I would use simply use 2.98 as a reference point. With a past dividend yield of 20 sen, at 2.98 one would be looking at a yield of 6.7%. The second assumption is a purchase price 2.40 based on the lowest price for 2007. That would be a yield of 8.3%."

Two reference points were used. 2.98 and 2.40. Both of them, yielded extremely poor results if an investor purchased Uchi solely for its dividends.

The end result is there for all to see. Investing in a stock for its dividend yields can fail and I have provided a clear example with actual facts.

And again, I am not saying investing for dividends will NOT work. It's just this strategy is NOT a 100% sure win thingy.

But many could also provide me with examples where it will work!

And we do not have to look for. We also can use Uchi as the very sample where dividends do pay!

No joke!

Let me show an example where investing for a company's dividends can work!

For its IPO, Uchi was sold to public at a price of rm 4.80. So let's assume INVESTOR DY has the hindsight to buys 10,000 shares of UCHI after its IPO was listed at 5.50. ( Do allow me to use a higher number at 5.50 and not the IPO price of 4.80)

Cost of investment 55,000. Number of shares 10,000

ps: do verify each data with link provided. Uchi's dividends are tax exempts

• 2001 : 18 sen + 12 sen Special Dividend + Final Dividend

Dividends collected: 300 x 10 = 3000.00

• 2001 : 1 for 10 bonus issue Bonus Issue

Number of shares after bonus: 10,000 x 11/10 = 11,000

• 2001 : 6 sen + 6 sen Interim Dividend + Special Dividend

Dividends collected: 120 x 11 = 1320. Total dividends collected = 4320.00. Number of shares = 11,000. Cost of investment = 55,000. Yield = 7.8%.

• 2002 : 2 for 5 bonus issue Bonus Issue

Number of shares after bonus now = 11,000 x 7/5 = 15,400.

• 2002 : 6 sen + 4 sen + 15 sen Final Dividend + Special Dividend + Special Dividend

Dividends collected: 15.4 x 250 = 3850.

Total dividends collected = 3850 + 4320 = 8170.00

• 2002 : 16 sen + 6 sen Special Dividend + Interim Dividend (The interim is not tax exempt, so div = 4.32)

Dividends collected: 15.4 x 203.2 = 3129.38.

Total dividends collected = 8170 + 3129.38 = 11,299.38.

Cost of investment = 55,000. Current yield = 11299.38/55000 = 20.5%!!

• 2003: 22 sen Final Dividend

Dividends collected = 15.4 x 220 = 3388.

Total dividends collected = 3388 + 11,299.38 = 14687.38

• 2003: 1 for 10 bonus. Bonus Issue

Number of shares held now = 15.4 x 11/10 = 16,940

• 2003: 6 sen + 23 sen Interim Dividend + Entitlement - Others (Interim after less tax = 4.32 sen)

Dividends collected = 16.94 x 273.2 = 4628.

Total dividends collected = 4628 + 14687.38 = 19315.38

• 2004: 5 for 1 stock split Entitlement - Others

Number of shares now held = 16,940 x 5 = 84,700

• 2004: 2 sen + 5 sen Final Dividend + Entitlement - Others (Final dividend after less tax = 1.44)

Dividends collected = 84.7 x 64.4 = 5454.68.

Total dividends collected = 5454.68 + 19315.38 = 24770.06.

• 2004: 6 sen + 4 sen + 3 sen Interim Dividend + Entitlement - Others + Entitlement - Others (The 4 sen is not exempt, so after tax = 2.88)

Dividends collected = 84.7 x 118.80 = 10,062.36.

Total dividends collected = 10,062.36 + 24770.06 = 34832.42

• 2005: 6 sen + 4 sen + 3 sen Final Dividend + Entitlement - Others + Entitlement - Others ( The 4 sen again is not tax exempt, so after tax = 2.88)

Dividends collected = 84.7 x 118.80 = 10,062.36.

Total dividends collected = 10,062.36 + 34832.42 = 44894.78.

• 2005: 6 sen + 2 sen + 2 sen Interim Dividend + Interim Dividend + Interim Dividend (the second 2 sen is not tax exempt, so after tax = 1.44)

Dividends collected = 84.7 x 94.40 = 7995.68.

Total dividends collected = 7995.68 + 44898.78 = 52890.46.

• 2006: 6 sen + 1 sen + 3 sen Final Dividend + Special Dividend + Special Dividend (The 1 sen is not tax exempt, so after tax = 0.72.)

Dividends collected = 84.7 x 97.20 = 8232.84.

Total dividends collected = 8232.84 + 52890.46 = 61123.30.

* Cough * It's only 2006 and the total dividends received is already more than the investment outlay of 55000!

• 2006: 6 sen + 3 sen + 1 sen Interim Dividend + Interim Dividend + Interim Dividend (The 1 sen is not tax exempt, so after tax = 0.72.)

Dividends collected = 84.7 x 97.20 = 8232.84.

Total dividends collected = 8232.84 + 61123.30 = 69356.14.

• 2007: 6 sen + 2 sen + 9 sen Final Dividend + Special Dividend + Special Dividend (The 2 sen is not tax exempt, after tax of 27% = 1.46)

Dividends collected = 84.7 x 164.60 = 13941.62.

Total dividends collected = 13941.62 + 69356.14 = 83297.76

• 2007: 6 sen + 4 sen Interim Dividend + Special Dividend

Another bumper year!

Total dividends collected = 84.7 x 100 = 8470.

Total dividends collected = 8470 + 83297.76 = 91767.76

• 2008: 4 sen + 6 sen Special Dividend + Final Dividend

Total dividends collected = 84.7 x 100 = 8470.

Total dividends collected = 8470 + 91767.76 = 100237.76.

• 2008: 6 sen Interim Dividend

Total dividends collected = 84.7 x 60 = 5082.

Total dividends collected = 5082 + 100237.76 = 105319.76.

• 2009: 6 sen Final Dividend
• 2009: 3 sen Interim Dividend

Total dividends collected = 84.70 x 90 = 7623.

Total dividends collected = 7623 + 105319.76 = 112942.76.

How? Yes, you need to verify my data and my counting, for I could always make a mistake.

Now if numbers are correct, what do we have?

One had made an investment outlay of buying 10,000 shares in Uchi back in 2001 at a cost price of 5.50. Cost of investment = 55000. Total dividends since then is a whopping 112,942.76!

And from the bonus and splits since buying in 2001, the investor would now hold 84,700 shares. Uchi last traded at 1.26 yesterday. Meaning these shares are now worth 106722.00. Meaning the shares are sitting on a paper profit of 56722.00!

How?

Well, if one had bought in 2001 at a price of 5.50, how could I say that investing in a stock for its dividends would not work????

Confused?

This very same stock, in the posting Investing In A Stock For Its Dividend Yields, yielded a terrible investing result.

How?

My point?

Well... let me repeat again... "However, all I am saying is the investor should be careful. There are many incidents where such an investing can fail! "

And in this stock, Uchi, I have showed that dividend investing yielded two very contrasting end results!

So next time, someone whispers to you, that Ah Bang Bang Company, is a super stock, and if one had invested in the stock since listing, one would be super duper rich and because it had such a wonderful track record, one should invest in it NOW for its dividends too.

Yeah, it could work. There's always a possibility it could work but do bear in mind, it could always fail too.

Just like Uchi, it could also fail. Despite its track record, investing in Uchi in 2007 for its dividends yielded a poor result unlike investing in 2001.