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Humanising Finance
June 2018
5 ways to get into the habit of saving

A Simple Dividend Investing Strategy

Many of us plan to retire with a stable, passive income. Investing in dividend stocks is one of the popular ways to achieve this. Imagine receiving your dividend pay check every year, regardless of whether the markets go up or down.

The quick way to identify dividend stocks is by searching for stocks with stable income, low debt and good dividend yield.
1. Stable Income
The main goal of going into business is to make money. One of the first criteria we must have when choosing a company is to see if the business is able to generate good and stable earnings. To do this, we use the Return on Equity (ROE) financial ratio. It measures how efficiently the management of the company is using its resources (shareholders' equity) to generate profits.
2. Low Debt
One of the most common downfalls of any business is the inability to repay its outstanding loans. Hence, it is important to ensure that the companies we invest in do not go bankrupt before we exit. We can use the financial ratio called Debt to Equity ratio (D/E) to measure the debt level of the company relative to the shareholders' equity. A certain amount of debt is necessary to ensure that businesses thrive. But how much is too much? Ideally, the D/E should be less than 1 (the amount of debt is less than the amount of shareholders' equity). Otherwise, there could be a risk that the company will not be able to repay its debts.
3. Dividend Yield
When a company is able to generate stable income with low Debt to Equity ratio, we would like to be rewarded as a shareholder. Companies with a stable income usually reward their shareholders by returning the profits in the form of dividends. We can use the financial ratio called Dividend Yield which compares the dividends against the share price. The higher the Dividend Yield, the higher is one's overall return from owning shares of the company.

Leveraging Technology to Enhance Search Process

The most frustrating thing in investing is the fact that there are so many dividend stocks to pick from. Is there a better and simpler way to find good dividend stocks? A quick check on Singapore Stock Exchange website shows that there are more than 750 listed companies. Fortunately, with the help of technology, the search process can be automated with the use of screeners.

Maybank Kim Eng clients can access a more sophisticated screening tool - Recognia Strategy Builder directly from the KE Trade online trading platform. This screening tool has a user-friendly interface and allows you to build your own investing strategy by choosing from a wide range of criteria including 35 fundamental ratios and 25 technical indicators. Attend one of our FREE seminars today to find out more about our platform!

To summarise, looking for investment ideas can be simplified if we keep in mind the basic criteria that define a good and well-managed company. One that is generating stable income, has low debt and rewards shareholders with consistent dividend payouts. Finally, leverage screening tool to simplify and automate the search process.

Click here to open a FREE KE Trade account to get access to the feature.
Disclaimer: This message is for general knowledge or information only. It is not an offer or invitation to buy or sell securities, futures or other products or services. Our products or services vary in different jurisdictions, subject to their respective terms and conditions and the licences our affiliates and us hold. This message is not an advice or recommendation for any financial planning, investment, legal, tax or other purposes and, accordingly, no responsibility or liability is assumed by us or our affiliates, whether directly or indirectly, from any person taking or not taking action.

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