"Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.
When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend." - Wikipedia.
There are 3 types of dividends that you should know:
1) Know their declaration date. It is important as the company will pay the dividends on that exact day.
2) Record date. The company that are declaring the dividends will have to compile all the informations to the shareholders.
3) Ex-dividend date. It allows the investors to catch the last bus up for the dividend payments. It will allow the pending transactions for stock bought to clear before it cashes out money to all shareholders.
So, why buy stocks that gives out dividends? One, it is bonus money. Secondly, it is low risk as these companies are strong, stable and mature companies. They have alot of cash reserves. As their cash reserves grow, debts going low, value is going higher and higher, its all a win-win situation for all.
There are people who try to get in the wagon just in time before the announcements of dividends, they buy it before and sell it right after collected the dividends. Why not, right? You will get extra pocket money at no cost at all. Keep dreaming!
This usually doesn't work, because the stock price usually adjusts immediately to reflect the dividend payout, as interested buyers know the stock no longer includes the current dividend payment and they adjust the amount they're willing to pay accordingly.
Monday, August 16, 2010
Annual Reports
How do you read an annual report? Well, it's up to you.
What do you want from them?
a) Profits
b) Dividends
c) Risk / Stability
d) Growth
Reading Annual Reports are like decoding "MonaLisa". It is not a 5 years old kid book.
There are 8 sections in most annual reports. Not all reports will have all the sections or the same type and amount of information. Here are the sections, what you'll find in each, and questions you should ask yourself:
Chairman of the Board Letter: Should cover changing conditions, previous objectives met or missed and upcoming objectives, and actions taken or not to be taken. Is it well written? Read between the lines; what is being apologized for?
Sales and Marketing: Should cover what the company sells, how, where and when. Is it clear where it's making most of its money presently? Is the scope of lines, divisions and operations clear?
Management Discussion: Is it a clear discussion of significant financial trends over the past few years? How candid and accurate is it?
Financial Statements: Check sales, profits, R&D spending, inventory and debt levels over time. Read the footnotes to ferret out other information. (the balance sheets, the cash flow statements, and the income statements), which are discussed in detail in the Financial Statements section.
Subsidiaries, Brands and Addresses: Where is their headquarters? Is it clear what lines, brand names the company has and what their overseas distribution network is?
List of Directors and Officers: How many directors are insiders and how many are outsiders (a good mix is ideal)? Are the directors well-known and respected? Are there an unusual number of directors (5 to 12 is typical)?
Stock Price History: General trend of price over time. Up or down? On which exchange is the company listed? Do they have a history of paying dividends?
Qouted from IG.
What do you want from them?
a) Profits
b) Dividends
c) Risk / Stability
d) Growth
Reading Annual Reports are like decoding "MonaLisa". It is not a 5 years old kid book.
There are 8 sections in most annual reports. Not all reports will have all the sections or the same type and amount of information. Here are the sections, what you'll find in each, and questions you should ask yourself:
Chairman of the Board Letter: Should cover changing conditions, previous objectives met or missed and upcoming objectives, and actions taken or not to be taken. Is it well written? Read between the lines; what is being apologized for?
Sales and Marketing: Should cover what the company sells, how, where and when. Is it clear where it's making most of its money presently? Is the scope of lines, divisions and operations clear?
10 Year Summary (or less): Is this included? Have revenues and profits increased each year?
Management Discussion: Is it a clear discussion of significant financial trends over the past few years? How candid and accurate is it?
Financial Statements: Check sales, profits, R&D spending, inventory and debt levels over time. Read the footnotes to ferret out other information. (the balance sheets, the cash flow statements, and the income statements), which are discussed in detail in the Financial Statements section.
Subsidiaries, Brands and Addresses: Where is their headquarters? Is it clear what lines, brand names the company has and what their overseas distribution network is?
List of Directors and Officers: How many directors are insiders and how many are outsiders (a good mix is ideal)? Are the directors well-known and respected? Are there an unusual number of directors (5 to 12 is typical)?
Stock Price History: General trend of price over time. Up or down? On which exchange is the company listed? Do they have a history of paying dividends?
Oceanus
Recommend: BUY with target price of S$0.40
Cutting the loss-making restaurants.
Oceanus has shut down 5 of its restaurants due to loss of RMB8m in Beijing and Shanghai. F&B side has been pulling the stocks down as it is affecting the its whole operation. Meanwhile, Oceanus has opened a new restaurant in Taiwan which targets consumers from middle to upper income
group, in contrast to its previously opened restaurant outlets which target consumers from the average income group.
Expanding the abalone tanks.
It's their main products, adding more tanks (at least 1000) in 1H10. Oceanus is expecting to have at least 32,000 tanks, now have 26,000 tanks. Currently, land is not a problem for Oceanus as they have more than enough land to store all the tanks.
We like Oceanus for its
1) sheer abalone
farming capacity, and
2) low abalone production cost.
Key risks to our call are
1) lack of appetite from Chinese consumers for abalone, and
2) continuing and/or worsening losses of its F&B outlets.
Source: DMG
Cutting the loss-making restaurants.
Oceanus has shut down 5 of its restaurants due to loss of RMB8m in Beijing and Shanghai. F&B side has been pulling the stocks down as it is affecting the its whole operation. Meanwhile, Oceanus has opened a new restaurant in Taiwan which targets consumers from middle to upper income
group, in contrast to its previously opened restaurant outlets which target consumers from the average income group.
Expanding the abalone tanks.
It's their main products, adding more tanks (at least 1000) in 1H10. Oceanus is expecting to have at least 32,000 tanks, now have 26,000 tanks. Currently, land is not a problem for Oceanus as they have more than enough land to store all the tanks.
We like Oceanus for its
1) sheer abalone
farming capacity, and
2) low abalone production cost.
Key risks to our call are
1) lack of appetite from Chinese consumers for abalone, and
2) continuing and/or worsening losses of its F&B outlets.
Source: DMG
Sunday, August 15, 2010
Stock for Beginners: What is Stock?
What is stock? or wondered why shares of stock exist? This introduction to the world of investing in stocks will provide answers to those questions and show you just how simple Wall Street really is.
It is easier to learn with example.
Imagine you wanted to start a retail store with members of your family. You decide you need $1000 to get the business off the ground so you incorporate a new company. You divide the company into 1000 pieces, or "shares" of stock. You price each new share of stock at $1. If you can sell all of the shares to your family members, you should have the $1000 you need (1,000 shares x $1 per share = $1000 cash.
So, stocks in your family retail store and Wall Street Stocks are no different, take a look:
When you buy share of stock, you are purchasing a tiny piece of a company.
The current stock price of McDong's is S$2.00. The stock market is nothing more than an auction. Individual investors, just like you, are making decisions with their own money in a real-time auction. If someone wants to sell their shares of McDong's and there are no buyers at $2.00, the price would have to continually fall until someone else stepped in and placed a buy order with their broker, let's say S$1.90. If investors thought McDong's was going to grow its profits faster than other companies, they would be willing to bid up the price of the stock at S$2.10 (which is affected by supply and demand because there are only a fixed amount of shares in existence, in this case 1,000,000 shares). Likewise, if a large investor were to dump his or her shares on the market, the supply could temporarily overwhelm and drive the stock price lower.
It's simply supply and demand thing. McDong only have 1,000,000 shares to go around. If there are more demands than supply, the price will go up towards Mount Everest. If there are too much supply, and nobody is buying it, the price will sank down the sea. Get it?
It is easier to learn with example.
Imagine you wanted to start a retail store with members of your family. You decide you need $1000 to get the business off the ground so you incorporate a new company. You divide the company into 1000 pieces, or "shares" of stock. You price each new share of stock at $1. If you can sell all of the shares to your family members, you should have the $1000 you need (1,000 shares x $1 per share = $1000 cash.
So, stocks in your family retail store and Wall Street Stocks are no different, take a look:
When you buy share of stock, you are purchasing a tiny piece of a company.
The current stock price of McDong's is S$2.00. The stock market is nothing more than an auction. Individual investors, just like you, are making decisions with their own money in a real-time auction. If someone wants to sell their shares of McDong's and there are no buyers at $2.00, the price would have to continually fall until someone else stepped in and placed a buy order with their broker, let's say S$1.90. If investors thought McDong's was going to grow its profits faster than other companies, they would be willing to bid up the price of the stock at S$2.10 (which is affected by supply and demand because there are only a fixed amount of shares in existence, in this case 1,000,000 shares). Likewise, if a large investor were to dump his or her shares on the market, the supply could temporarily overwhelm and drive the stock price lower.
It's simply supply and demand thing. McDong only have 1,000,000 shares to go around. If there are more demands than supply, the price will go up towards Mount Everest. If there are too much supply, and nobody is buying it, the price will sank down the sea. Get it?
Sell It When You Know It
Fear!
It is our number one enemy. We tend to be afraid, fearful of losing. One important lesson of any investment skill is fear no more. We, the investors sell away our best stocks based on emotions, making mistakes:
Keep the dying stock.
The longer you keep it, the worst it will get. Its okay to lose sometimes. If you realize it earlier, the better it will get. Some companies do fall. Learn about them. Are they gonna be okay? Analyze their balance sheets. Read what the chairman's notes for the future.
Holding to gain more.
Greed. The more you have, the greedier you become. Be contented. Do not hesitate to sell it. Its better go gain S$100 than to gain nothing. There is always a risk that the price will keep shooting up and up, or worst, going down worst than you expected. Sometimes its is good to protect yourself, your portfolio even if you gain less than what you expected.
Timing the market.
You do not time the market. The market is the mother of all. They can do whatever they want, and you can't stop them. If she is happy, she goes up 10-fold in a day. When she is broken-hearted, she goes down 100-fold in an hour.
It is never your skill to time the market. Sell it when you have to, even though your stock are now S$1.93 and you are waiting for S$2 before you sell. Believe me, S$0.07 is not worth it. In the end, you might sell it at S$1.80. Who knows, right?
Pay attention.
Evaluation. Go through your portfolio every week or month. See what is going on in the company, are they doing well? Are they on track with what they are doing? Reevaluate all the company. Let go the "not-so-good". Is there any M&A? Who is the new competitors?
Well, now you know. Sell if you have to. Do not fear the market. The greatest enemy of all is you youself.
It is our number one enemy. We tend to be afraid, fearful of losing. One important lesson of any investment skill is fear no more. We, the investors sell away our best stocks based on emotions, making mistakes:
Keep the dying stock.
The longer you keep it, the worst it will get. Its okay to lose sometimes. If you realize it earlier, the better it will get. Some companies do fall. Learn about them. Are they gonna be okay? Analyze their balance sheets. Read what the chairman's notes for the future.
Holding to gain more.
Greed. The more you have, the greedier you become. Be contented. Do not hesitate to sell it. Its better go gain S$100 than to gain nothing. There is always a risk that the price will keep shooting up and up, or worst, going down worst than you expected. Sometimes its is good to protect yourself, your portfolio even if you gain less than what you expected.
Timing the market.
You do not time the market. The market is the mother of all. They can do whatever they want, and you can't stop them. If she is happy, she goes up 10-fold in a day. When she is broken-hearted, she goes down 100-fold in an hour.
It is never your skill to time the market. Sell it when you have to, even though your stock are now S$1.93 and you are waiting for S$2 before you sell. Believe me, S$0.07 is not worth it. In the end, you might sell it at S$1.80. Who knows, right?
Pay attention.
Evaluation. Go through your portfolio every week or month. See what is going on in the company, are they doing well? Are they on track with what they are doing? Reevaluate all the company. Let go the "not-so-good". Is there any M&A? Who is the new competitors?
Well, now you know. Sell if you have to. Do not fear the market. The greatest enemy of all is you youself.
Principle of Investing
Hi.
What's the principle of investing in stocks?
Start NOW!
Starting early does make a difference. In general, every year you wait doubles the required monthly savings to reach the same level when you retire.
An example:
If you keep S$500 every month for 5 years, then stop doing it, or save S$500 after 5 years of doing nothing. You have the save amount exactly after 10 years. So why not start early?
Understanding yourself.
Know yourself. Learn about yourself. What is your goal? What is your need in the future? What do you want? Start drawing a map of where you want to be in after 5 - 10 years. Set a goal, be there after 10 years. If you don't keep reminding yourself of what you want, I am afraid you might slack and go off track.
How healthy are you with your financial system? How much do you have? Earnings? Expenses? Debts? Financial Goals?
Risks?
If you don't make it here, what are you going to do next? Accepting failure and move on is part of life lesson nobody can teach you. Are you willing to take risks? How much risks can you handle? This is all about you. If you can figure it out, you can imagine the risks you can take and learn to adapt with it and expand it slowly in the future.
Plans! Long-term or short-term?
How do you spend your money? U have needs such as cars, houses, girlfriend, family, retirement. It should also detail where the money will come from. Hopefully the numbers will be about the same.
Don't try to time the market. Get in and stay in. We don't know what direction the next 10% move will be, but we do know what direction the next 100% move will be.
Review your plan periodically, and whenever your needs or circumstances change. If you are not confident that your plan makes sense, talk to an investment advisor or someone you trust.
Buy Stocks
Now that you understand yourself, the risk and your goal, invest in stocks. Buy it, and KEEP IT. It require two things, patience and discipline. The stocks will give you benefits, long-term view. Dividends and the stock you bought will definately be a winner. This approach reduces the entire universe of investment vehicles to two choices: stocks and stock mutual funds. In the long run, they're the winners: In this century, stocks beat bonds 8 out of 9 decades, and they're well in the lead again.
Get Help
Some people just can't handle DIY. Try it, and if it doesn't work, seek professional advise.
If you want others to handle your financial affairs for you, just make sure your money is being spent wisely.
What's the principle of investing in stocks?
Start NOW!
Starting early does make a difference. In general, every year you wait doubles the required monthly savings to reach the same level when you retire.
An example:
If you keep S$500 every month for 5 years, then stop doing it, or save S$500 after 5 years of doing nothing. You have the save amount exactly after 10 years. So why not start early?
Understanding yourself.
Know yourself. Learn about yourself. What is your goal? What is your need in the future? What do you want? Start drawing a map of where you want to be in after 5 - 10 years. Set a goal, be there after 10 years. If you don't keep reminding yourself of what you want, I am afraid you might slack and go off track.
How healthy are you with your financial system? How much do you have? Earnings? Expenses? Debts? Financial Goals?
Risks?
If you don't make it here, what are you going to do next? Accepting failure and move on is part of life lesson nobody can teach you. Are you willing to take risks? How much risks can you handle? This is all about you. If you can figure it out, you can imagine the risks you can take and learn to adapt with it and expand it slowly in the future.
Plans! Long-term or short-term?
How do you spend your money? U have needs such as cars, houses, girlfriend, family, retirement. It should also detail where the money will come from. Hopefully the numbers will be about the same.
Don't try to time the market. Get in and stay in. We don't know what direction the next 10% move will be, but we do know what direction the next 100% move will be.
Review your plan periodically, and whenever your needs or circumstances change. If you are not confident that your plan makes sense, talk to an investment advisor or someone you trust.
Buy Stocks
Now that you understand yourself, the risk and your goal, invest in stocks. Buy it, and KEEP IT. It require two things, patience and discipline. The stocks will give you benefits, long-term view. Dividends and the stock you bought will definately be a winner. This approach reduces the entire universe of investment vehicles to two choices: stocks and stock mutual funds. In the long run, they're the winners: In this century, stocks beat bonds 8 out of 9 decades, and they're well in the lead again.
Get Help
Some people just can't handle DIY. Try it, and if it doesn't work, seek professional advise.
If you want others to handle your financial affairs for you, just make sure your money is being spent wisely.
Subscribe to:
Posts (Atom)