SET agri and other high yield shares

[mccw]

I was looking through the listings in paper a few days ago having never really followed the Thai stock market mauch and noticed some high dividend paying stocks, higher than most UK stocks I know of anyway.

The agro sector had some of the highest, such as cooking oil company paying 9.77% and others between 6.5 and 9.5.

Some other sectors high paying shares were in this range too; such as sansiri developers at 7.7% ish I think it was and IT City retail at around that too.

I never invested in stocks before but these dividends have got me thinking about it.

What are posters opinions on these high dividend paying stocks in Thailand? Are they exceptionally risky or are they just happy to share in the profits of good business.

The agro sector I hypothesise could stand to gain from the ASEAN opening and possible EU - THai free trade agreement so I am especially interested in these areas.

Thoughts?

Cheers

[fletchsmile]

Similar caveats to other markets, that you can't look at the dividend yield in isolation. Need to look at the dividend cover, forecast earnings (sustainability) and so on, plus ideally you want a company that will grow profits and dividends over time at a rate that will exceed inflation. So you need to look carefully on a case by case basis.

The average yield on the SET is just under 3%. So if you focused on high yielding stocks, it's highly possible to get a decent return, as you've noticed. Obviously not as safe as cash and your capital goes up and down.

Unless you're prepared to spend quite a bit of time researching individual shares, it would probably be best to buy a mutual fund/ unit trust. Let the fund manager effectively do the work for you in buying a basket of shares to spread your risk.

I've held UOB (formerly ING) Big Cap Thai Div LTF fund for about 5 years. The dividend has generally been increasing most years over time. Last div was 1.75 baht a unit on a price of around 23 baht, which was around 7.5% yield at the time. That's basically on larger Thai stocks with good yields. The price has also more than doubled over that time frame excluding the divs.

As mentioned though you need to be able to stomach the capital risk. The average of all my Thai funds in 2008 for example dropped close to 40% - worst year since 2000. I wasn't holding this particular fund at this time though. But funnily enough the prospective yield was one factor I bought at the end of 2008 after that year's large drop.

My view: good fund. Nice yield. Larger stocks so more likely quality names. LTF too so you can get the tax relief. Just watch how you pay tax on the divs, for most income earners it would be better to pay the flat 10%. Even then you're looking close to a 7% yield. BTW if you don't earn income here you can still buy, but just don't get the tax relief. Same if you buy over 500k.

http://www.uobamth.co.th/EN/upload/fund/mbook-14.pdf

http://www.uobamth.co.th/EN/MutualFunds_detail.asp?pp=6&id=14

http://www.uobamth.co.th/EN/upload/fund/nubook-14.pdf

There are some people that just buy these type of high yield big cap funds, focus on the yield and don't worry about the short term capital fluctuations as long as you don't need the capital, long term it will likely give a nice yield and sort out inflation too.

Cheers

Fletch:)

Edited October 21, 2013 by fletchsmile

[fletchsmile]

BTW Good case in point on div yields on single stocks was BP in the UK. The year prior to the oil disaster in had off the coast of the USA it was among the highest yielding stocks on the UK FTSE. The following year after the oil spill it had to cut its dividend completely. Anyone relying on this or not having spread their risk would have seen zero income and a capital loss. It's now back to dividend paying status . So someone with a reasonably diversified portfolio or unit trust would have weathered the temporary storm. BTW I bought BP a few months back too for the div yield, as the price and yield looked undervalued now the company seems to be back on track

[mccw]

I thinking about BP and shell yes- both about 5%

BP pe is only 5-6 so looks good for long term I think/ once they get past the spill fall out in USA

Thanks for the UOB link.

[fletchsmile]

Yes I also hold Shell. Other GBP stocks I like/hold for the divs are: ADN, AZN, BKG, OML, TSCO.

All I acquired last year or so as part of building some additional income producing assets for div yield. I hold thru my bank in Singapore, where I sold a couple of unit trusts and didn't want to pay the rip-off up front fees (often 5%) to switch to another fund.

In contrast, to Singapore, Thai funds have reasonable up front charges of around 1.5%-ish on average. Also while I've a good understanding of most of those UK businesses which I've known for many years, I can't say I've the time to learn about most individual Thai companies, plus there's a bit more admin here.

Only downside with the GBP shares is the FX risk compared to THB for someone living here and planning to live here. Then again a nice cushion should we move back to the UK.

Cheers

Fletch

[monkeycountry]

Double post, sorry

Edited October 21, 2013 by monkeycountry

[monkeycountry]

I assume you guys know the dividends are simply the shareholders' own money being paid out right? The total value and thereby shareprice of the company falls just as much as the total dividend payout.

[David48]

mccw ... you mentioned Sansiri as a high yielding paying stock.

It's one I own, have sold, have bought again, so I can give you some direct info on that particular share/stock.

This is a 3 year representation of Sansiri's share price.

I bought most of mine in Sept 2012 paying around 2.80 - 2.84 Baht.

As the price escalated I sold it off, making a modest profit ... I never expected it to double or triple in price.

Then, when the price dropped back to 2.08 in Sept of this year, I started buying back into the stock up till it reached 2.36.

One of the reasons for the recent share price movement was this recent event, the news of which was covered by Thai Visa ... bangkok-expat-shocked-by-foam-filled-condominium-wall

RESEARCH

SIRI: Today’s Company Update - Buy (TP Bt2.88)

SIRI’s CEO said in Bangkokbiznews that 2013 net profit would likely be

flat or lower than last year’s number due to hefty selling and marketing

expenses in 1Q13.

We have anticipated this, as our forecast already

suggests a -7.5% YoY change in the bottom line; however, other

research houses are expected to cut their earnings forecasts.

This might put some pressure on the share price in the short term, but we

reaffirm our confidence in SIRI’s long-term outlook. Maintain Buy with

Bt2.88 TP (9x 14E PER).

More Here

So, this research has a target price (TP) of 2.88 Baht.

.

[wordchild]

I assume you guys know the dividends are simply the shareholders' own money being paid out right? The total value and thereby shareprice of the company falls just as much as the total dividend payout.

while what you say is true in theory (and in certain textbooks), and certainly is true where you are a sole proprietor and also, the manager of a company. It does not really work (as an investment strategy), in the real world, in large quoted companies, where you have external minority shareholders and company managements, whose interests may not be completely aligned. A dividend obligation helps to keep managements honest and , in my opinion, gives the management (and the board) a sharper focus on capital discipline, cash generation and on producing value for external shareholders. This focus can have a very positive impact on the performance of a company over time. In my experience the very best long term investments are in companies that put growing the dividend, for their shareholders, front and centre of their strategy. I would concede that there are also certain large companies that have produced great shareholder value, over the long term, without paying any (or paying just notional dividends) eg Berkshire Hathaway but these tend to be the exception. And , in the case of Berkshire, you have one dominant shareholder who has run the business pretty much like a sole proprietor.

Edited October 22, 2013 by wordchild

[ExpatJ]

Another strategy is to buy up the high/medium div Thai stocks a month or ideally sooner before XD date, then sell the day before (many people seem to buy these stocks just before XD date to get the dividends) - this can be good if you worry that after the div payout the share price will then continue down due to broader economic reasons.

Edited October 22, 2013 by ExpatJ

[brit1984]

I assume you guys know the dividends are simply the shareholders' own money being paid out right? The total value and thereby shareprice of the company falls just as much as the total dividend payout.

correct in theory IF you assume the following:

> all companies consist of nothing more than piles of shareholders' cash waiting to be returned via dividends

> all investors in publicly listed stocks have a nominal return on capital requirement of exactly zero

> stock market is a perfectly efficient market with perfect information, zero transactions costs, infinite liquidity, etc

in reality, it's a bit different