When invest in stock market, why are people so hard up over dividends?

[Greenrookie]

I will only invest in these companies if I am exactly aware of its growth potential

how do you judge its growth potential? What do you see?

You see the news? Which news source? How do you analyze these news source?

You see their industry group? What indicators do you use?

You see their financial reports? How to see their financials to pin point them as a growth company?

All the answers are likely available from a good book e.g. "Common Stocks and Uncommon Profits" by Philip A. Fisher.

Of fisher 15 rules, I think I can only do 4-5. While I did email IR of various companies, it usually is specific qn regarding their report/ announcements. I have not tried answering them about their competitor or supplier. Most listed companies supplier or customers are not listed or local, not sure how to scuttlebutt to that level. Maybe there is still some advantage a fund manager has over retail investors:

[Ray168]

Wahkao,

Your query was debated & answered in hardware zone..... why now post new thread in VB?

http://forums.hardwarezone.com.sg/eat-dr...64-32.html

Some people different invest/trade style.
Gone were the days, people read books, try and modify strategies based on their style and now look for short answers from forums?

Guess DW had his followers from EDMW to create senseless threads

http://forums.hardwarezone.com.sg/eat-dr...64-32.html

25-12-2013, 05:44 PM

Post: #1








wahkao
Newbie



Posts: 18
Joined: Dec 2013
Reputation: -1




When invest in stock market, why are people so hard up over dividends?
When invest in stock market, why are people so hard up over dividends?

That day I discussion stock market with friend, they say they look at dividends first. No dividend no talk. even my finance trained friend also say he look at dividend first. I hear him say this buei ta han dunno what he thinking.

I was thinking, dividends dont matter. The idea of receiving dividends every year sounds nice, but if you think carefully, its just left pocket right pocket. When you receive dividends, the share price will drop together with the dividend.

In fact, having no dividend is better because you are in control of when you receive your dividend.

Shouldnt other valuation ratios like PE, NAV, debt, gearing,growth be more important?

So really, why are people so hard up over dividends when they invest?


no offense to dividend warrior, just trying to have healthy debate so everyone become wiser. I know dividend warrior subscribe to the idea of dividend + growth. I dont agree with dividend, but I agree with growth.

[wahkao]

Wahkao,

Your query was debated & answered in hardware zone..... why now post new thread in VB?

http://forums.hardwarezone.com.sg/eat-dr...64-32.html

Some people different invest/trade style.
Gone were the days, people read books, try and modify strategies based on their style and now look for short answers from forums?

Guess DW had his followers from EDMW to create senseless threads

http://forums.hardwarezone.com.sg/eat-dr...64-32.html

25-12-2013, 05:44 PM

Post: #1








wahkao
Newbie



Posts: 18
Joined: Dec 2013
Reputation: -1




When invest in stock market, why are people so hard up over dividends?
When invest in stock market, why are people so hard up over dividends?

That day I discussion stock market with friend, they say they look at dividends first. No dividend no talk. even my finance trained friend also say he look at dividend first. I hear him say this buei ta han dunno what he thinking.

I was thinking, dividends dont matter. The idea of receiving dividends every year sounds nice, but if you think carefully, its just left pocket right pocket. When you receive dividends, the share price will drop together with the dividend.

In fact, having no dividend is better because you are in control of when you receive your dividend.

Shouldnt other valuation ratios like PE, NAV, debt, gearing,growth be more important?

So really, why are people so hard up over dividends when they invest?


no offense to dividend warrior, just trying to have healthy debate so everyone become wiser. I know dividend warrior subscribe to the idea of dividend + growth. I dont agree with dividend, but I agree with growth.

Yes? Why are you drawing attention to it as if I have committed some crime??
Is there any law that says that you cant post similar threads in different forums?

The reason is because I like to listen to all points of views. From trolls,laymen ,traders and seasoned investors.

[wahkao]

All the answers are likely available from a good book e.g. "Common Stocks and Uncommon Profits" by Philip A. Fisher.

These 15? Lets take a look

Fisher's famous "Fifteen Points to Look for in a Common Stock" from "Common Stocks and Uncommon Profits" are a qualitative guide to finding well managed companies with growth prospects. According to Fisher, a company must qualify on most of these 15 points to be considered a worthwhile investment:

1. Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years? A company seeking a sustained period of spectacular growth must have products that address large and expanding markets.

2. Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited? All markets eventually mature, and to maintain above-average growth over a period of decades, a company must continually develop new products to either expand existing markets or enter new ones.

3. How effective are the company's research-and-development efforts in relation to its size? To develop new products, a company's research-and-development (R&D) effort must be both efficient and effective.

4. Does the company have an above-average sales organization? Fisher wrote that in a competitive environment, few products or services are so compelling that they will sell to their maximum potential without expert merchandising.

5. Does the company have a worthwhile profit margin? A company can show tremendous growth, but the growth must bring worthwhile profits to reward investors.

6. What is the company doing to maintain or improve profit margins? Fisher stated, "It is not the profit margin of the past but those of the future that are basically important to the investor." Because inflation increases a company's expenses and competitors will pressure profit margins, you should pay attention to a company's strategy for reducing costs and improving profit margins over the long haul. This is where the moat framework we've spoken about throughout the Investing Classroom series can be a big help.

7. Does the company have outstanding labor and personnel relations? According to Fisher, a company with good labor relations tends to be more profitable than one with mediocre relations because happy employees are likely to be more productive. There is no single yardstick to measure the state of a company's labor relations, but there are a few items investors should investigate. First, companies with good labor relations usually make every effort to settle employee grievances quickly. In addition, a company that makes above-average profits, even while paying above-average wages to its employees is likely to have good labor relations. Finally, investors should pay attention to the attitude of top management toward employees.

8. Does the company have outstanding executive relations? Just as having good employee relations is important, a company must also cultivate the right atmosphere in its executive suite. Fisher noted that in companies where the founding family retains control, family members should not be promoted ahead of more able executives. In addition, executive salaries should be at least in line with industry norms. Salaries should also be reviewed regularly so that merited pay increases are given without having to be demanded.

9. Does the company have depth to its management? As a company continues to grow over a span of decades, it is vital that a deep pool of management talent be properly developed. Fisher warned investors to avoid companies where top management is reluctant to delegate significant authority to lower-level managers.

10. How good are the company's cost analysis and accounting controls? A company cannot deliver outstanding results over the long term if it is unable to closely track costs in each step of its operations. Fisher stated that getting a precise handle on a company's cost analysis is difficult, but an investor can discern which companies are exceptionally deficient--these are the companies to avoid.

11. Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition? Fisher described this point as a catch-all because the "important clues" will vary widely among industries. It is critical for an investor to understand which industry factors determine the success of a company and how that company stacks up in relation to its rivals.

12. Does the company have a short-range or long-range outlook in regard to profits? Fisher argued that investors should take a long-range view, and thus should favor companies that take a long-range view on profits. In addition, companies focused on meeting Wall Street's quarterly earnings estimates may forgo beneficial long-term actions if they cause a short-term hit to earnings. Even worse, management may be tempted to make aggressive accounting assumptions in order to report an acceptable quarterly profit number.

13. In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders' benefit from this anticipated growth? As an investor, you should seek companies with sufficient cash or borrowing capacity to fund growth without diluting the interests of its current owners with follow-on equity offerings.

14. Does management talk freely to investors about its affairs when things are going well but "clam up" when troubles and disappointments occur? Every business, no matter how wonderful, will occasionally face disappointments. Investors should seek out management that reports candidly to shareholders all aspects of the business, good or bad.

15. Does the company have a management of unquestionable integrity? "If there is a serious question of the lack of a strong management sense of trusteeship for shareholders, the investor should never seriously consider participating in such an enterprise."

[Ray168]

I agreed with Jared Seah that looking forward to your reflection...

http://forums.hardwarezone.com.sg/eat-dr...64-32.html

1) wahkao,

Now that you have got quite a lot of interesting answers to your question, it would be interesting to hear your reflection after reading them.
What are your thoughts now?

Don't worry. There are some hybrids here. You are not alone



2) Dear fellow forumers,

I think wahkao had been a good catalyst to bring out some very insightful comments that benefit us all.

Especially those that are new here, or are shy to ask questions.

Time will tell whether a person is sincere in asking questions he/she don't understand; or that person is just being a nuisance.

We have quite a few "detectives" here who are very good at fishing out charlatans and those out to deceive us.

May we hold off being too quick on the "negative rating" thing? (For asking a question?)

It can give the wrong impression and frighten off newer forum members from speaking up with an alternative viewpoint....

It's Christmas after all!

Wahkao,

Your query was debated & answered in hardware zone..... why now post new thread in VB?

http://forums.hardwarezone.com.sg/eat-dr...64-32.html

[quote='memphisb' pid='70010' dateline='1388149936']
Some people different invest/trade style.
Gone were the days, people read books, try and modify strategies based on their style and now look for short answers from forums?

Guess DW had his followers from EDMW to create senseless threads

http://forums.hardwarezone.com.sg/eat-dr...64-32.html

25-12-2013, 05:44 PM

Post: #1








wahkao
Newbie



Posts: 18
Joined: Dec 2013
Reputation: -1




When invest in stock market, why are people so hard up over dividends?
When invest in stock market, why are people so hard up over dividends?

That day I discussion stock market with friend, they say they look at dividends first. No dividend no talk. even my finance trained friend also say he look at dividend first. I hear him say this buei ta han dunno what he thinking.

I was thinking, dividends dont matter. The idea of receiving dividends every year sounds nice, but if you think carefully, its just left pocket right pocket. When you receive dividends, the share price will drop together with the dividend.

In fact, having no dividend is better because you are in control of when you receive your dividend.

Shouldnt other valuation ratios like PE, NAV, debt, gearing,growth be more important?

So really, why are people so hard up over dividends when they invest?


no offense to dividend warrior, just trying to have healthy debate so everyone become wiser. I know dividend warrior subscribe to the idea of dividend + growth. I dont agree with dividend, but I agree with growth.

Yes? Why are you drawing attention to it as if I have committed some crime??
Is there any law that says that you cant post similar threads in different forums?

The reason is because I like to listen to all points of views. From laymen to traders and seasoned investors.

[wahkao]

I agreed with Jared Seah that looking forward to your reflection...

please do not throw this topic off track.

If you want to discuss about me, you can start a new topic titled "What you think of wahkao? Why is he posting the same topic everywhere else?"

Otherwise, dont throw it off track.
The posts here are so far very insightful and I wish to keep it that way.

[Jared Seah]

Thank you Ray168

I can be very blue-eyes and blond.

Trust but verify.

LOL!

[mrEngineer]

I will only invest in these companies if I am exactly aware of its growth potential

how do you judge its growth potential? What do you see?

You see the news? Which news source? How do you analyze these news source?

You see their industry group? What indicators do you use?

You see their financial reports? How to see their financials to pin point them as a growth company?

A honest answer after 5 years of investing experience in SGX: I don't know.

IMO, there is no simple formula to growth investing. Many growth stocks would have P/E more than 10 and that metric already start to stir my nervous stomach. I am leaning towards industry competence where u have strong knowledge of a particular industry and you have access to private information like some fund managers or simple to understand business. For e.g. for former, if u work in a bank middle or back office and you know clearly about silver lake. For e.g., for latter, if u work in a private equity fund and invest into ARA in early days.

I got burnt recently with China Fishery thinking that I know of superior information by subscribing to fishing industry magazines etc. But only to realize that sticking to my core knowledge for any growth stock is much safer. Another example is Yongnam. Clear market leader, venturing overseas, almost clinched Myanmar airport which threw e market price off the hook. What happened in e end?

If u turn back e clock 5-10 years ago, will u dare to invest in Super Group, Q&M dental, Nam Cheong and Osim? I don't think I will dare to do so..

Therefore, I rather wait for margin of safety where I think market is mispricing and happy with dividends if any that come along. The dividends also act as a indicator that pricing should not collapses as long as dividend is sustainable by cash flow and debt cost. For e.g. I invested recently in CSE global before e sale announcement of UK biz and divested after I think it's overvalued. Another e.g. but not so adequate will be Wilmar.

[arthur]

Dividends to me is just a part of a overall factors package I use to assess a prospective company.

I do have interest in evaluating how does the company management uses its equity to generate more returns to the shareholders, no doubt that increasing dividends are a sign of healthy business prospect. However, smaller companies esp, tech start ups tend to be unable to dish out dividends due to management arguments of need to divert all resources to capturing market shares and increasing competitive advantages.

Some companies manage to do so, eg. Microsoft in early years, while many others failed to (pull up the dot coms failures for remembrance).

Still, I don't buy into the argument "Look at the dividends" as it can cloud one's perspective especially younger investors that it is a end all factor to consider.

Lotsa factors are inclusive: ROE, Mgt capability & integrity, intrinsic value, companies abilities to capture market share (local and aboard), etc.

My 2 cents chip in.

[chialc88]

I have split personality and I sometime turn on by high dividend and sometime ignore it or wish that my favorite coy does not give any dividend.

When I look at my coy, I like to imagine that all of them is high growth coy which is capable of re-investing into higher return aka there is no need to gives any dividend. It's performance will drive its share price and I wish they never give any dividends.

Unfortunately, these coy are usually higher PE and I could not afford to buy too many shares of each coy. I will hold them dearly but will not feel comfortable to buy more... Anyway, their natural share price increase is inline as a % of my portfolio.

I am so lucky to be a owner of these stocks.

Some other time, my coy has reasonable PE. It's a cash cow with stablising share price. Dividend is very important to me. It's a simple way to tell whether it's still generating milk.

P.S. I acquired Boardroom few years back. I suspect that it's one of the company that WAHKOH mentions that borrow money to pay for dividend (esp after newreq acquisition)
Might need to review my portfolio again.


A Life not Reflected is a Life not Worth Living.