Fundamental Analysis Workshop Series Session Five – Dividend Investing

1. Fundamental Analysis Workshop Series Session Five – Dividend Investing

2. DISCLOSURES & DISCLAIMERS This research material has been prepared by NUS Invest. NUS Invest specifically prohibits the redistribution of this material in whole or in part without the written permission of NUS Invest. The research officer(s) primarily responsible for the content of this research material, in whole or in part, certifies that their views are accurately expressed and they will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this research material. Introduction Metrics Q & A

3. DISCLOSURES & DISCLAIMERS Nothing in this research material constitutes a representation that any investment strategy or recommendation contained herein is suitable or appropriate to a recipient’s individual circumstances or otherwise constitutes a personal recommendation. It is published solely for information purposes, it does not constitute an advertisement and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. The research material should not be regarded by recipients as a substitute for the exercise of their own judgement. Any opinions expressed in this research material are subject to change without notice. Introduction Metrics Q & A

4. SYLLABUS Introduction Metrics Q & A

5. Agenda • Dividend Yield / Payout Ratio • Beta • Cyclical? Non-cyclical? • Visibility of earnings • FCF (Free Cash Flow) Introduction Metrics Q & A

6. INTRODUCTION Introduction Metrics Q & A

7. PROFILE • NUS Invest Research Analyst - Property • Year 2 BBA • 2 years experience • Pure Fundamental Analysis Introduction Metrics Q & A

8. Measures for dividend stocks Introduction Metrics Q & A

9. Dividend Yield • Percentage of what company pays out a year over price • = annual dividend per share / price per share • “bang for your buck” Introduction Metrics Q & A

10. Why so important? • Some investors require minimum stream of cashflows • Invest in stocks with high, stable dividend yields • E.g. $1 dividend per year, for $10 share, yield is 10% Basic Decrypting Applying the Information Introduction Where to find? Q & A

11. Payout Ratio • Amount of earnings paid out to shareholders • = Dividends per share / earnings per share • E.g. $1 dividend per year, for $10 share, yield is 10% Introduction Metrics Q & A

12. Why so important? • Sustainability of dividend • Low ratio – earnings support dividend • Smaller dividends easier to pay out than larger dividends Introduction Metrics Q & A

13. Beta β • Measure of volatility, or systematic risk • Of a security/portfolio compared to market • 1.5 means stock is 50% more volatile than market • Found by regression analysis Introduction Metrics Q & A

14. Why so important? • Many utilities < 1, less risky • High tech stokcs > 1, more risky • Many high dividend stocks < 1, eg. SPH Introduction Metrics Q & A

15. Introduction Metrics Q & A

16. Non-Cyclical • Defensive stocks not very correlated to economic fluctuations • Goods and services we always need: • Utilities, household non-durables (eg. P&G), Tobacco Introduction Metrics Q & A

17. Cyclical • Earnings depend on whether or not economy is strong • Strong – people spend on luxuries: • Car manufacturers, airlines, furniture retailers, clothing stores, hotels and restaurants Introduction Metrics Q & A

18. Charting – which is cyclical? Introduction Metrics Q & A

19. Visibility of earnings • Extent which future projections are probable • factors: regulatory uncertainty, price volatility and weak economy • Can also refer to presence in market – dominant company greater visibility Introduction Metrics Q & A

20. Free Cash Flow • Operating CFs – capital expenditures • Cash company is able to generate after paying for asset base • = EBIT (1-t) + Dep & Amrt– Change NWC - Capex Introduction Metrics Q & A

21. Why is FCF important? • Pursue opportunities that add shareholder value such as new products or acquisitions • Earnings can be subjectivebut cash is real • -vecashflow is not necessary bad – investments in capital Introduction Metrics Q & A

22. Q & A Introduction Metrics Q & A

23. THANK YOU! Introduction Metrics Q & A