Let us consider Singapore Technologies Engineering Limited which is listed on SGX as ST Engg. A look at the dividend history reveals that it gave out a dividend of $0.1711 per share in 2007 and $0.1788 per share in 2008.
Dividend yield is simply given dividend divided by price in terms of percentage. Let us now consider the price history of ST Engg. The highest and the lowest price of ST Engg in 2007 is $3.98 and $3.18 while the highest and the lowest price of ST Engg in 2008 is $3.65 and $1.99. To make things simple, let us define the average closing price of ST Engg to be the average of the highest and lowest closing price. Thus the average closing price of ST Engg is $3.58 for 2007 and $2.82 for 2008.
Let us then compute the average dividend yield by using the dividend and divide it by the average closing price.
The average dividend yield in 2007 will be $0.1711/$3.58*100% = 4.78%
The average dividend yield in 2008 will be $0.1788/$2.82*100% = 6.34%
It can be seen that a lower price will enable us to receive a higher dividend yield and vice versa. Thus by taking the yield into consideration, it can help us in making decisions on investments. As such, you should buy stocks when the dividend yield is attractive and vice versa.
Taking this into consideration, attractive yields can only be achieved when stock prices are low and that often happens in a bear market. This is often the time when most of us would hesitate to put our funds into the stock market due to fear and pessimism. However, if you think along the line of trying to get a good dividend yield, this will often be the best time to invest in the stock market logically.
However, this line of reasoning should only be applied to stocks of fundamentally strong companies or ETF that track stock indices. The reason is because such companies are more likely to be giving out dividends in times of recession and poor economic outlook as compared to fundamentally weak companies in general. As for ETFs, the companies that consist of the stock indices which the ETFs are tracking, are likely to be fundamentally strong companies with large capitalization.
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Hi kay,
ReplyDeleteHow do you look for dividend history of companies under STI?
Yahoo finance?
But its not really accurate right?
thanks for information
Hi,
ReplyDeleteYou can go to the SGX website @ www.sgx.com. Click on 'Price' on the top left corner on the website and select the company that you are interested in. Subsequently, a pop out window will appear and you can check out the dividend history of the company under 'Past Bonuses, Dividends, Interests, Offers, Rights and Other Entitlements'. I hope this helps.
hi, kay,
ReplyDeletei was wondering whether any website can sort according to dividend yield, i cannot find this function using yahoo finance, do you have any recommendation?
Thanks
Hi Zzz,
ReplyDeleteYou can try this website @ http://www.sharesinvestment.com
I hope this helps.
Kay
Dear Kay,
ReplyDeleteThanks for the information. Can advise which section can i found info about dividend yield? I cannot find out on this website. Thanks a lot
Hi Zzz,
ReplyDeleteYou can press the 'prices' button on the top of the homepage. After that, you can click on 'highest yield' on the next page. Subsequently, the stocks with the highest yield will appear in descending order.
Kay
ic, Thanks a lot, Kay.
ReplyDelete