My Stock Holdings (June)

June has been a busy period for me as I was busy packing stuff to go back to Singapore. It seemed that this month has been a volatile month due to the effect of Greece flirtation with the possibility of default.

ST Eng's price was pushed to a low of 3.24 before recovering recently to above 3.3, which is my average buy-in price. Many people in forums have expressed the opinions that ST Eng is richly valued in terms of P/E and P/B. I had see that the valuations are rich but dividend yield remains good. Given time, perhaps I'll see whether its dividend policy is sustainable and whether cash holdings is decreasing. 

Singpost also recovered its price dip to above 1.90. This can be attributed to annual dividends increasing to 7c from 6.25c previously. Also, it divested some of its traditional business for a profit and that might also had lead to price increase. There's some points I'd like to read up on Singpost given time and they are listed as follows: 

• Sustainability of dividend
• Debt obligations and dividends against earnings
• P/E and P/B valuations (Benjamin Graham had advocated sale of share when it reaches overvaluation state. Therefore, I want to see if Singpost is grossly overvalued and warrant a sale. It is unlikely though, as I regard Singpost as my crown jewel. I know falling in love with stock is no good..)
• Review growth of earnings (can be quite hard as Singpost recently changed its accounting practice)

Lastly, HPH Trust has been slowly dipping through the month of June while Bank of Ireland closed pretty high at the end of June amidst signs of Greece coming out of the talks with a solution. 

There was no dividend issued for the month of June. Hence, dividend received remains at $278.25


**Edit: Chart removed because I set it to update with latest information -- not accurate info

My Stock Holdings (May)

Many companies are reporting their financial results this month and this lead to some price fluctuations. In my portfolio, all had reported their results with the exception of Bank of Ireland. As of now, I have no intention to sell any stock in my holding based on the results. Hence barely any change in the composition of my holding.

Also, I'm scouting for good stock to add to the portfolio and will buy in when I return to Singapore from my exchange.

One of my criteria for buying a stock is that it must give out dividend. Singpost, ST Eng and HPH Trust gives out dividend in my portfolio. Bank of Ireland is an exception as I recognise that it is a high growth stock and does not necessarily need to give out dividend.

As of May 2015, I received a total dividend of $278.25

**Edit 1: Revised dividend amount to a lower value as I accidentally calculated dividends I haven't receive.

**Edit 2: Chart removed because I set it to update with latest information -- not accurate info

Nordic Group (MR7.SI)

Nordic Group is a company that specialises in control system and automation needs for vessels. The company is mainly divided into 3 business segments: Systems Integration, Precision Engineering and Scaffolding Services. (http://www.nordicflowcontrol.com/)

Having a market capitalisation of 38.08M as of 24 September 2014, Nordic is a relatively small company. Although it is a small player in the industry, its does not really have the competitive advantage in the industry. Therefore, the reason to buy is mainly due to its undervalued stock price.

The following is the EPS through the years.

Table of Key Stats

Year	EPS (cents)	NAV (cents)	Dividends (cents)
2009	2.9	-	-
2010	2.3	9.4	0.53
2011	0.4	9.3	0.25
2012	1.1	10.2	0.25
2013	1.5	11.5	0.25

As you can see from the Table, the EPS has been improving for three years straight with the NAV increasing steadily. An additional bonus is the consistent dividends over the years. Based on the closing price of $0.097, P/E = 6.47, NAV = 0.84 and Dividend Yield = 2.58%

The low P/E and NAV ratio are really attractive, although "unpopular" stock usually command these low valuations. With the decent dividend yield, one can hold this counter for the long term and wait for the market to discover its true value. Given the small size of the company, Nordic might even be good for takeover play.

You can try to take advantage of the illiquidity of Nordic to get it on the cheap. At the current situation, Nordic has a Buy queue of $0.097 and a Sell Queue of $0.100. Try to queue low, and wait for sellers to hand the stock to you. If aiming for quick gain, similarly queue early to sell high. On some days, Nordic may have sink or spike sharply. Take those periods to grab cheaply or sell on gain.

Unfortunately, I sold all my Nordic shares recently to fund my exchange trip. Otherwise, I would have kept it for the annual dividend and/or wait for larger spikes to offload them.

Dividends: A Passive Income

Dividends are payment made by a company to its shareholders, usually out of its profits. Dividend policy varies from company to company. For example, some company do not pay dividends regularly. Others, like Singpost, pays dividends every quarter. Hutchison Port Trust pays bi-annually and Straco pays yearly.

People view dividends as an added bonus when they trade stocks. For an investor, dividends may be the make-or-break decision for buying the stock. This is because in the long run, dividends eventually becomes your passive income. One good example is Dividend Warrior, who regularly blogs about his dividend returns and income. In the latest 13 August 2014 post, he had accumulated $10,262 of dividends. These dividends are based on a capital of $222,560. That is my idol right there!

Usually when I tries to preach about the importance of investing for passive income, the usual response is that the capital is too low to start. However, I beg to differ. Everyone must start at some point and when better to start than now? For young investors, the most precious asset you own is TIME! Given that your capital returns an interest of 5% per annum and that you reinvest your interests, $1000 will become $2000 in 14.4 years. Make your money work as early as possible! In addition, SGX will cut lot size from 1000 shares to 100 shares by 19 January 2015. Currently, you can only buy stocks in blocks of 1000 shares, or 1 lot. By next year, you can purchase stocks in blocks of 100 shares. This means that blue chips like DBS or Keppel Corp will be more affordable to the public.

The gains to be made from investments are from either capital gains from rising share price or dividends. Although capital gains are usually gained in a shorter period of time and thus more satisfying, a smart investor will realise that dividends pay well in the long term. Everyone looks forward to retirement eventually and living expenses after retirement generally comes from CPF. But what if you manage to build a sizeable portfolio by the time you retire? Instead of putting your cash into a saving accounts which yields less than 1%, put it into dividend-yielding stocks like REITs and Trusts. These two types of stocks usually yield at least 5% dividend a year. In addition to CPF withdrawal, dividend payment can really add to the comfort of your retirement. For me, investment is really about building a portfolio that can eventually provide enough dividends for financial freedom/retirement. That should also be the objective that other have for investing.

As a result of my love for dividends, I had been slowly buying dividend stocks like Trusts and REITs the past 2 years. Below is my humble dividend records in the last two years of investing:

Do note that Dividend Yield reflects average yield of only dividend-bearing stocks while Portfolio Dividend Yield is the dividend yield based my enlarged portfolio capital.

I've highlighted the benefits of dividends in investing and also briefly covered how time is our most precious asset. Also, I've mentioned about two categories of stocks, REITs and Trusts, which bears comparatively higher dividend yield. Hopefully after this post, you might give investing a good thinking over and start your own investing journey!

Financial Jargon

Ever saw P/E somewhere in stocks discussion forum? Or EPS in the annual reports of companies? P/E and EPS are some of the financial terms you'll find in the world of investing. Before I start my first case study, it is important to know what the terms mean. They help one to decide the intrinsic performance of a company as well as the valuation of the company in the market. Here are some of the more common terms and also what it represents.

P/E (aka Price to Earning Ratio)
The most common metric that you will find. Normally found alongside stock quotes. The number can be found by the equation: P/E =  Stock Price / Earnings
By Earnings, it is meant as Earnings Per Share
P/E ratio helps to value the stock of a company. It is done by comparing the stock price relative to the income generated. For example, if SingPost has a P/E of 26, the buyer is actually paying $26 for every $1 that the company earns. By comparing the P/E ratio of different companies within the same industry, one can find out which companies are "cheaper".
However, P/E is not a clear cut metric to buy stocks. P/E may be higher because the company is expanding fast. P/E may be low because company is in a unpopular industry. P/E will not even exist if the company is loss-making. You can use more ratios introduced further on to determine whether a company is a "good buy".

EPS (aka Earnings Per Share)
The earnings per share made by the company in a financial year. Normal stated in annual reports. Calculated according to the equation: EPS = Net Profit / Total Shares Outstanding
For example, SingPost has a net profit of $128,175,000 and has an outstanding ordinary share of 1,899,921,000. Using the formula, you'll find that the EPS is 6.75 cents as reported in the annual report. Going a step further to find P/E ratio, the stock price of SingPost is currently at $1.765 while EPS is $0.0675.
Dividing stock price by EPS, P/E = 26.14.

P/B (aka Price to Book Ratio)
Book here refers to the Net Asset Value (NAV) of the company. P/B ratio helps one determine whether the stock is priced at a discount or premium to its tangible assets. ( < 1 represents a discount while > 1 represents a premium)
Comparing P/B ratios between companies of similar industries will help determine which one is a good catch. This is especially important because there are different "standard" of P/B in each industry. For example, land developer normally trade at a discount to NAV while technology stocks trades at a premium.

Dividend Yield
When the company chooses to distribute part of its earnings to the shareholders, the money is termed as the dividend. Dividend yield is calculated by the equation: Annual Dividend / Current Stock Price
Dividend distribution is definitely not indicative of a company's strength. Apple Inc, for example, famously did not pay dividend from 1996 to 2012. The stock price was not held back AT ALL.
However, companies that give away dividend is an added bonus as the cash given back is in your pocket. Furthermore, it shows that the company does have the cash and not just "cooking the book".
SGX had once undergone a S-Chip Scandal episode where it involved a number of  China-based companies listed in Singapore. The companies had suddenly gone bankrupt and was later found to be guilty of accounting fraud. Regular dividend distribution acts as a detector to see a company is potentially fraudulent as real hard cash has to be paid out.
                                                                                                                                               
These four financial metrics are the most common metrics I use to filter out a preliminary list of stocks to invest. Google Finance provides a very good platform to filter out a list based on your required criteria. From there, you research deeper on those shortlisted companies and pick the most promising one. This is what "doing your homework" is when it comes to investing.