PHILIPPINE STOCK MARKET SERIES - May 17, 2018 (Bonus Article: My Dividend Investing Strategy in the PSE!)

Hi Guys,

Here my update for today :)

Philippine Stock Market Summary:
The PSEi declined on Wednesday, losing 16.41 points or 0.21% to 7,869.56. Index decliners led gainers 16 to 11, while 3 issues remained unchanged. Likewise, most sectors ended in red with Holding Firms (-0.94%) leading the decliners and Property (+0.86%) leading the gainers. Significant index decliners were MBT (-3.20%), FGEN (-2.85%), LTG (-2.50%), GTCAP(-2.40%), and PCOR (-2.39%). Meanwhile, significant index gainers were ALI (+2.49%), BDO(+2.24%), and MEG (+2.15%).

Value turnover decreased to Php6.4Bil from Php8.7Bil the previous session. Meanwhile, foreigners turned net sellers, disposing Php480Mil worth of shares.

Personal Thoughts:
Just received my dividends from GMA7.:) 7.80% yield
Now you're wondering why i chose this strategy instead of the action packed trading one. The very first reason for this philosophy is that i look at companies as businesses rather than stocks. This means that i look at their values in the long run and with careful picking i believe that these businesses will thrive for years to come and will continue cashing out distributions.

Picking a stock or business in the PSE is not an easy task since not all good companies pay off good dividends. Some give distributions but with very little yield, some ought to reinvest their profits and forego giving it altogether, some have not so enticing financials (e.g. lower net income, very expensive valuation etc.)

In order to pick a good dividend stock i look for the following criteria. I am currently adapting the tactic being used on the dividendgrowthinvestor* blog.

Company that has consistently raised distributions for at least ten years in a row.
Company that is trading at a price/earnings ratio that is at least above 20.
Company that has its dividend payout ratio is not higher than 60%
Company that has its dividend growth exceeded inflation over the past decade

However he had a disclaimer on these as well
"It is important to remember that dividend investing should not be seen as a mechanical process. Investors should further analyze in detail the companies which their list generates and evaluate their competitive advantages, understand their business model and decide for themselves whether future dividend growth could be maintained."

Take note that the author of this one is writing on a US stocks perpective. On the PSE side it's a very different story. Unlike the US there are a few companies who gave dividends on a regular basis and of those you did they don't have a long history of dividend increases. With that in mind i modified the criteria below to be applicable with the Philippine Market setting:

Dividend Yield is at least 2.5%
P/E Ratio is not over 20
Dividend Growth is at least 10% from last year
Consistently gives dividends for the past 5 years
Dividend Payout is not over 60%
Return of Equity at least 15%

In addition, i average out the companies on a per sector basis. The higher the score the company gets on these set of criteria, the better pick the company is.

I hope you get the basic idea of how i do my analysis. ON my next post i will explain each item in details and the rationale behind on this one.

HOPING FOR YOUR FINANCIAL SUCCESS
WIL

Sources:
https://ph27.colfinancial.com/ape/Final2/research/downloads/2018-05-17-PH-D.PDF
https://www.dividendgrowthinvestor.com/2011/03/my-entry-criteria-for-dividend-stocks.html
http://tipsphilippinestockmarket.blogspot.com/

FULL DISCLOSURE:
CPG,FGEN,FLI,GLO,GMA7,MER,MFC,SLF,TEL,VLL