Saturday, February 20, 2010

The hunt for yields

Business Times - 20 Feb 2010

Here's a selection of regional stocks that appear promising in terms of dividend payouts

ONE of the questions I'm asked most often is: which good stocks provide decent dividend yields? Today, I've decided to do a stock screening to see which names I come up with. I ranked stocks based on their dividend yields. And then, to make sure these yields have more certainty of being sustained, I weeded out those with a market capitalisation of less than $100 million and those deemed by StarMine (the provider of the data) to have low earnings quality - whose earnings can swing wildly. I carried out the screening process in four markets - Singapore, Hong Kong, Japan and Taiwan. Here's what I found:

Taiwan has the most companies with a market cap of at least $100 million that pay dividends of 6 per cent or more. Many are technology-related companies. There are also some from the marine sector, in machinery manufacturing and real estate development. The median market cap of these companies is $218 million.

I came up with the same number of companies from Singapore and Hong Kong - 16 from each market. Among Singapore stocks, Datapulse appears to be the highest dividend-paying stock that has been able to sustain its payout, at least in the past few years. Its yield this year, should it be able to sustain last year's magnitude of distribution, is 10.9 per cent. Meanwhile, its operating margin is healthy at 21.8 per cent and its pre-tax return on assets is 14.9 per cent.

Big-cap stocks - with market cap of $1 billion and above - that made our list include StarHub, M1, SingPost, Venture Corp and Thai Beverage. StarHub's yield, based on last year's payout, is 8.7 per cent. M1's yield would work out to 6.4 per cent, and SingPost's at 6 per cent. Venture Corp and Thai Beverage would each have a yield of 5.6 per cent. The median market cap of these 16 stocks is $181 million.

As for Hong Kong, the companies represented are more mixed. There are construction and engineering firms, textile and apparel producers, a commercial bank and a specialty retailer. The yields range from 5.6 to 10.9 per cent. The median market cap is $331 million.

In Japan, the Tokyo Stock Exchange had the lowest number of stocks that met our criteria. The median market cap of these companies is $224 million.

So there you have it - a shortlist of some stocks which potentially can sustain their dividend payouts, based on data from StarMine. You, of course, have to study them yourself and decide if any of them are good buys. Good luck!