Monday, 23 April 2012

Dividend Payout Ratio divide by Forecast PE = Dividend Yield

Some companies have a dividend policy.  Knowing their dividend payout ratio (DPO) and their forecast P/E, you can estimate the DY thus:  

= DPO / PE 
= D / E x E / P
 = D / P

DY = Dividend / Price
P/E = Price / Earnings
DPO = Dividend / Earnings

Bursa Malaysia stock market high dividend yield stock

One of the ways to look for Bursa Malaysia stock market high dividend yield stocks is to look at the company dividend payout ratio.

If a stock forecast PE ratio is 10x and the dividend payout ratio is 40%.
Then 40% divided by 10 = 4% dividend yield.

Zhulian shares dividend payout ratio is 60%.
Assuming Zhulian forecast PE ratio is 8x. Then 60% divided by 8 = 7.5%
Zhulian forecast dividend yield will be 7.5%.

Pchem dividend payout ratio is 50%.
Assuming PChem PE ratio (forecast 2011) is 20x.
50% divided by 20 = 2.5%.
Therefore, Pchem dividend yield will be 2.5%.

Why use forecast PE ratio?
The dividend yields as stated in the newspaper are historical dividend and the company may not pay that amount of dividend anymore.

Why dividend payout ratio is important?
If don't have such a policy, we don't know how much dividend the company is going to pay. If the company have a dividend payout ratio policy, and with forecast PE ratio, we then know what is the forecast dividend yield.

Therefore, we should look for stocks with low PE ratio and high dividend payout ratio because it will lead to high dividend yield.

But I want remind investors not to invest in stocks just base on high dividend yield. High dividend yield stocks are good, but other things also important, such as PE ratio, growth, gearing, etc.  I suggest we use a minimum of few factors, that is PEGGY Method.  

Do you want to get 10% dividend yield but your share price drop 20%?

List of stocks with dividend payout ratio. Some of them are actual dividend policy, and some are a commitment or target made by the management.

Boustead 70%
MSM 50%
TSH 20% to 30%
PChem or Petronas Chemical 50%
UOA Development or UOADEV 30% to 50%
Tambun Indah Land Bhd stock 40% to 60%
Maxis 75% but paying more than that.

My previous list. I am not sure whether all are still valid because I did not get the update. But Freight and Zhulian are no change.

Topglove 40%
Mamee-Double Decker (M) Bhd 50%
Tecnic Group Bhd 50%
Homeritz Corporation Berhad 40%
Freight Management 40%
Zhulian 60%

High Dividend Yield Malaysian Stocks

ECM's list of high-yield stocks for uncertain times - The Edge Malaysia

No comments: