Waiting patiently to buy bank shares
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.
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.
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.
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.