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Fundamental Analysis Workshop Series Session Five – Dividend Investing.

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Presentation on theme: "Fundamental Analysis Workshop Series Session Five – Dividend Investing."— Presentation transcript:

1 Fundamental Analysis Workshop Series Session Five – Dividend Investing

2 DISCLOSURES & DISCLAIMERS This research material has been prepared by NUS Invest. NUS Invest specifically prohibits the redistribution of this material in whole or in part without the written permission of NUS Invest. The research officer(s) primarily responsible for the content of this research material, in whole or in part, certifies that their views are accurately expressed and they will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this research material. Metrics Q & A Introduction

3 DISCLOSURES & DISCLAIMERS Nothing in this research material constitutes a representation that any investment strategy or recommendation contained herein is suitable or appropriate to a recipient’s individual circumstances or otherwise constitutes a personal recommendation. It is published solely for information purposes, it does not constitute an advertisement and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. The research material should not be regarded by recipients as a substitute for the exercise of their own judgement. Any opinions expressed in this research material are subject to change without notice. Metrics Q & A Introduction

4 SYLLABUS Metrics Q & A Introduction SEMESTER 2 WK 2 Introduction to Stock Investing WK 3 Art of Reading Annual Reports WK 4 Picking the Right Stocks(Part I) – Top Down Analysis WK 5 Picking the Right Stocks (Part II) – Bottom Up Analysis WK 6 Picking the Right Stocks (Part III) – Dividend Investing RECESS WEEK WK 7 Portfolio Management for the Retail Investor WK 8 Case Study 1 WK 9 Case Study 2 WK 10 Case Study 2 WK 11 Traders Interview

5 Agenda Dividend Yield / Payout Ratio Beta Cyclical? Non-cyclical? Visibility of earnings FCF (Free Cash Flow) Metrics Q & A Introduction

6 INTRODUCTION Metrics Q & A Introduction

7 PROFILE NUS Invest Research Analyst - Property Year 2 BBA 2 years experience Pure Fundamental Analysis Metrics Q & A Introduction

8 Measures for dividend stocks Metrics Q & A Introduction

9 Dividend Yield Percentage of what company pays out a year over price = annual dividend per share / price per share “bang for your buck” Metrics Q & A Introduction

10 Where to find? Basic Decrypting Applying the Information Q & A Introduction Why so important? Some investors require minimum stream of cashflows Invest in stocks with high, stable dividend yields E.g. $1 dividend per year, for $10 share, yield is 10%

11 Payout Ratio Amount of earnings paid out to shareholders = Dividends per share / earnings per share E.g. $1 dividend per year, for $10 share, yield is 10% Metrics Q & A Introduction

12 Why so important? Sustainability of dividend Low ratio – earnings support dividend Smaller dividends easier to pay out than larger dividends Metrics Q & A Introduction

13 Beta β Measure of volatility, or systematic risk Of a security/portfolio compared to market 1.5 means stock is 50% more volatile than market Found by regression analysis Metrics Q & A Introduction

14 Why so important? Many utilities < 1, less risky High tech stokcs > 1, more risky Many high dividend stocks < 1, eg. SPH Metrics Q & A Introduction

15 Metrics Q & A Introduction

16 Non-Cyclical Defensive stocks not very correlated to economic fluctuations Goods and services we always need: Utilities, household non-durables (eg. P&G), Tobacco Metrics Q & A Introduction

17 Cyclical Earnings depend on whether or not economy is strong Strong – people spend on luxuries: Car manufacturers, airlines, furniture retailers, clothing stores, hotels and restaurants Metrics Q & A Introduction

18 Charting – which is cyclical? Metrics Q & A Introduction

19 Visibility of earnings Extent which future projections are probable factors: regulatory uncertainty, price volatility and weak economy Can also refer to presence in market – dominant company greater visibility Metrics Q & A Introduction

20 Free Cash Flow Operating CFs – capital expenditures Cash company is able to generate after paying for asset base = EBIT (1-t) + Dep & Amrt – Change NWC - Capex Metrics Q & A Introduction

21 Why is FCF important? Pursue opportunities that add shareholder value such as new products or acquisitions Earnings can be subjective but cash is real -ve cashflow is not necessary bad – investments in capital Metrics Q & A Introduction

22 Q & A Metrics Q & A Introduction

23 THANK YOU! Metrics Q & A Introduction

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