I have bought this dividend stock in 2015, so far the compounding annual return is 23% pa (absolute return about 70% in 2.5 years) , though this return has nothing to shout about because many stocks have returned many times more than this. But hang on, I bought it because of its steady dividend and only expecting not more than 10% return p.a. Now, it has far exceeded my expectation and this has prompted me to review how to pick the right dividend stocks in the future.
Below are my earlier write up on dividend stock
http://m-bagger.blogspot.com.au/2017/04/dividend-stock-strategy-good-enough-for.html
http://m-bagger.blogspot.com.au/2017/05/is-dividend-stock-strategy-fool-proof.html
Yes, it could be pure luck that I have picked Uchitec and not other dividend stocks. However, when I checked my little diary, I found the reason stated for the purchase in 2015- the company has come out with a energy saving modules that comply with European Eco-design requirements of having standby and off mode electrical power consumption of less than 0.5 watt. All right, dividend stock with clear growth strategy or new products/services ( probably that was the reason I did not go for BJToto or Magnum).
What do I do when dividend stock starts to grow? I believe the answer is obvious, sit back and enjoy the show. Who knows, this could just be the beginning of Uchitec's new growth phase and based on its past dividend payout record (average more than 90%), I would expect higher dividend per share (>13 sen) for FY17 (even at 13sen , it is still a decent 5.9% yield based on Rm2.20).
I hope I can use the same approach to find other similar dividend stocks that have growth potential. Some of the potential dividend stocks that I have on my list - Asia File, FPI(recently only started to buy but price went up too fast :( , Bermaz Auto (I know, IB not bullish on this sector), Old Town and Cocoaland. But the bad news is they are not in my buy zone yet.
Please do your own assessment on Uchitec or any of the potential dividend stock above as this is not a recommendation to buy these stocks. Merely for sharing purposes.
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Hi Voyager, I just read your article. Your analyse well and write well. I bought some UCHI recently at 1.81 and obviously it is tempting to sell now at 2.50+. Your philosophy "What do I do when dividend stock starts to grow? I believe the answer is obvious, sit back and enjoy the show." is interesting.
ReplyDeleteInitially i thought the same, but now I think a different strategy may be better. For example, i can take profits now, and buy it back later when price comes down. Of course there is no guarantee it will. But looking at many stocks, i dare say (with some exception like Nestle, Public bank) price do come down.
What 's your comment?
HI Tock,
DeleteThanks for your kind words and support.
Congratulations that you are also on board. Well, I agree with your view - take profit when the price has gone up and buy back when it is down later would be the best strategy in stock investment. But then we are not sure when it will come down or if it comes down, at what price will you re-enter or whether it will come down to the price we expected?
As for me, I would look at whether it has way exceeded its intrinsic value (or what we called overvalued) before selling.
In Uchitec's case, I would look at it from:-
1. PE ratio - historically the last 4 years it has been trading at PE 10 to 14 times. Now it is close to 18 based on FY16 results ( it is expected to be lower based on FY 17 as the mgt is expecting growth after 3 years with flat revenue in USD term). Yes, still higher than historical but not excessive and is market expecting good growth this year??
2. Dividend yield - historically ranging from 6% to 9%. At current price of 2.43, it is about 5.3% if they maintain FY16's 13 sen dividend. Again, the expectation would be higher than 5.3% if performance is better this year. It may be at the lower band of the dividend yield but again, not way below.
The excitement in stock investment is that there is always something that we don't know, so I am as puzzle as you whether the price will continue to climb or will there be correction soon? Of course, it will never be wrong to take profit as one bird in hand is better than 2 birds in bushes. As for me, I tend to go for longer term as it has just started to "grow" after staying stagnant for so many years. Just my 2 cents.
Multi Bagger
DeleteYou have listed 2 important criteria (PE and DY) to monitor the stock to decide to sell or not. They are very valid indicators.
Are there other stocks (beside those you listed in the above post) that are worth looking at?
Thanks for sharing.
Hi,
DeleteYou may want to read my posts on Tune Protect and WCE and appreciate if you could share your thought on these 2 stocks. I am still reading Q2 results announcement and will share more if I find companies that are interesting. Or you have other stocks that you would like to share, I would love to look at them too.