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Wednesday, March 23, 2011

Bursa Malaysia stock market high dividend yield stock

One of the ways to look for Bursa Malaysia stock market high dividend yield stocks is to look at the company dividend payout ratio.

If a stock forecast PE ratio is 10x and the dividend payout ratio is 40%.
Then 40% divided by 10 = 4% dividend yield.

Zhulian shares dividend payout ratio is 60%.
Assuming Zhulian forecast PE ratio is 8x. Then 60% divided by 8 = 7.5%
Zhulian forecast dividend yield will be 7.5%.

Pchem dividend payout ratio is 50%.
Assuming PChem PE ratio (forecast 2011) is 20x.
50% divided by 20 = 2.5%.
Therefore, Pchem dividend yield will be 2.5%.

Why use forecast PE ratio?
The dividend yields as stated in the newspaper are historical dividend and the company may not pay that amount of dividend anymore.

Why dividend payout ratio is important?
If don’t have such a policy, we don’t know how much dividend the company is going to pay. If the company have a dividend payout ratio policy, and with forecast PE ratio, we then know what is the forecast dividend yield.

Therefore, we should look for stocks with low PE ratio and high dividend payout ratio because it will lead to high dividend yield.

But I want remind investors not to invest in stocks just base on high dividend yield. High dividend yield stocks are good, but other things also important, such as PE ratio, growth, gearing, etc.  I suggest we use a minimum of few factors, that is PEGGY Method.  

Do you want to get 10% dividend yield but your share price drop 20%?

My blog link.

More on why Dividend Payout Ratio is important and a list of companies dividend payout ratio such as Topglove, Freight Management, Mamee, PChem, etc. Click here.

More on dividend.


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