Comparing the above 2 charts, I will be excited with the bottom one. The pattern here is that of 3 lines going up "almost parallel" to each other (monotonous "tramlines"). This company's earnings have been growing consistently over many years. It was therefore not surprising that its share price has risen in tandem. In addition, it has given dividends consistently over the years. This dividend too has grown in tandem with the earnings. However, since the share price has also risen, the DY over the years hovered probably around the same range.
Click here to see more companies with "monotonous tramlines" charts.
For long term investors, the total shareholder returns are from dividend and capital appreciation. Look at this post here:
Selected Stock Performance Review
http://spreadsheets.google.com/pub?key=0AuRRzs61sKqRdGZuWktpR2dvQUhhSmpkNElXY0NvWmc&output=html
Most of the total shareholder returns will be from capital appreciation of the stock prices. I will concentrate on ensuring that I invest in a company's earnings. The dividend is at best a "surrogate" indicator of this company's good earnings.
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2 comments:
I believe Perstima will deliver high earnings and dividend consistently for the next few years as
1. It is able to command the selling price of products due to its unique position as a single source of supply in both Malaysia and Vietnam.
2. High barriers entry. Ability to find a constant supply of material is paramount for this industry.
3. upgrading plants catering extra capacity has been completed. Dividend payout ratio would be higher.
4. Potential of earnings growth from its Vietnam plant as market growing bigger.
5. Operation is well run by experience Japanese.
However, Earnings would be highly volitile if steel price runs at sky-high. It can enjoy higher profit during commodity boom or turning into red should the cycle reverse.
I believe Perstima will deliver high earnings and dividend consistently for the next few years given
1. It is able to command the selling price of products due to its unique position as a single source of supply in both Malaysia and Vietnam. Therefore, it can maintain the profit margin.
2. High barrier entry. Ability to find a constant supply of material is paramount for this industry.
3. Upgrading plants catering extra capacity has been completed. Capital requirement for future expansion is limited.
4. Potential of earnings growth from its Vietnam plant as market grow bigger.
5. The company stands at net cash position and it has fully repaid its loan within a year for all upgrading costs.
6. The operation is well run by experince Japanese.
However, Earnings would be highly volatile if steel price runs at sky-high. It can enjoy higher profit during commodity boom or turning into red should the cycle reverse.
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