Waiting patiently to buy bank shares
By scheng1
@scheng1 (24650)
Singapore
September 9, 2016 9:47am CST
I intend to buy the shares of one of the largest banks in my country.
The share price in local currency is $15.44 at this moment.
I am willing to pay $12 for one share of it. That is because the dividend is 60 cents every year.
If I pay $12 for a share, and get 60 cents dividend, that is a return of 5%.
Any price higher than $12 will reduce the dividend yield.
Despite all the talks about economy slowdown, downsizing, default of corporate bonds, and whatever negative news, the share price stubbornly refuses to come down to $12.
I think I will have a long wait for it.
2 people like this
4 responses
@CaptAlbertWhisker (32507)
• Calgary, Alberta
9 Sep 16
I play safe and do time deposit accounts for now. Part of me wanted to try shares because I have an uncle who became a millionaire just by it. I am afraid of making a bad investment.
2 people like this
@scheng1 (24650)
• Singapore
6 Nov 16
@CaptAlbertWhisker Just a side note on DBS shares in 2007-2009.
The share price hit a high of $23.90 and fell all the way to $6.90.
That was the year when DBS announced retrenchment.
It was a big deal at that time, and caused a stir in parliament and labour union.
Dividend did not fall by the same percentage.
It was just a few cents lesser in 2010.
@succeednow (1633)
• Singapore
6 Nov 16
@scheng1 You mentioned that the dividend is 60 cents every year. But the dividend is not guaranteed. So if the the share price drops to $12 the dividend may drop as well.
1 person likes this
@scheng1 (24650)
• Singapore
6 Nov 16
I am talking about DBS bank.
As long as Temasek is the biggest shareholders, I do not see how DBS can cut its dividend in the foreseeable future.
In the case of DBS, even when the share price dropped to $6.90 in 2009, they did not cut the dividend by half.
A drop of price to $12 is not a big deal.
Wait till it drops to $6, then you know the economy is really bad.
1 person likes this
@scheng1 (24650)
• Singapore
6 Nov 16
@succeednow Share price does not have a perfect correlation with earnings.
Earning is not a good indicator, because earnings can be manipulated.
The best is to look at cash flow.
Some companies can post a record profit, but still have negative cashflow!
@succeednow (1633)
• Singapore
6 Nov 16
@scheng1 In general, if the economy is doing badly it will be reflected in the share price of the company and usually also on the company's earning. So if the company does not earn as much then they will give less dividend. That's why I say that the dividend will not stay as it is in different economic situations. I have not been following DBS so perhaps it is an exception.
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