I had a lengthy but productive discussion with a friend recently. i shall share it below.
as usual, no lengthy essays as i like to present in a short and concise manner.
we can see the obvious gains we can achieve through the effects of compoundation, and it is one of the more proven method, if not the most.
why then is it harder to succeed in singapore through the same principles of dividend investing and reinvesting?
we can see in the usa, there are numerous companies such as mcd, colgate, general mills, coca cola and more, which are perpetual dividend raisers. a lot of these companies have raised their dividend yoy for the past 25 years, some even more. u can google them out. And more importantly, a lot of these companies pay a quarterly dividend. and last but not least, no rights issue exists for them.
so we see a lot of investors in usa, are basically 'passive' dividend investors and sticking to the strategy of investing and reinvesting in these companies will lead to serious wealth being created. 15% pa is quite normal, if the plan is stuck to and no early cashing out occurs. this basically means doubling in less than 5 years. and if one starts at 20 and ends at 60, it will mean a multiplication factor of some 267 times. He won't want to end this cash generation machine in the first place!
now, there are NO companies in singapore which satisfy the above 3 important qualities, at least at the current moment. even pure blue chips, we hardly see them increase dividend yoy and they don't pay quarterly dividend. If you use 10 year as time frame, none fit the criteria. Correct me if I am wrong. JMH comes close, but it pays twice a year. If you use 5 years, then some reits come into the picture.
thus, unless one is prepared to invest in companies outside of singapore, the above points very very important factors to consider, if one is in the serious business of building solid wealth.
thus because it is not clear cut at all in singapore, hence the singapore dividend machine is not the same per se. It is basically not as simple here and more likely than not, a lot will end up buying and selling more frequently than what is necessary, buying and selling the wrong stock, or holding on to the stock which represents lost opportunity costs.
as usual, no lengthy essays as i like to present in a short and concise manner.
we can see the obvious gains we can achieve through the effects of compoundation, and it is one of the more proven method, if not the most.
why then is it harder to succeed in singapore through the same principles of dividend investing and reinvesting?
we can see in the usa, there are numerous companies such as mcd, colgate, general mills, coca cola and more, which are perpetual dividend raisers. a lot of these companies have raised their dividend yoy for the past 25 years, some even more. u can google them out. And more importantly, a lot of these companies pay a quarterly dividend. and last but not least, no rights issue exists for them.
so we see a lot of investors in usa, are basically 'passive' dividend investors and sticking to the strategy of investing and reinvesting in these companies will lead to serious wealth being created. 15% pa is quite normal, if the plan is stuck to and no early cashing out occurs. this basically means doubling in less than 5 years. and if one starts at 20 and ends at 60, it will mean a multiplication factor of some 267 times. He won't want to end this cash generation machine in the first place!
now, there are NO companies in singapore which satisfy the above 3 important qualities, at least at the current moment. even pure blue chips, we hardly see them increase dividend yoy and they don't pay quarterly dividend. If you use 10 year as time frame, none fit the criteria. Correct me if I am wrong. JMH comes close, but it pays twice a year. If you use 5 years, then some reits come into the picture.
thus, unless one is prepared to invest in companies outside of singapore, the above points very very important factors to consider, if one is in the serious business of building solid wealth.
thus because it is not clear cut at all in singapore, hence the singapore dividend machine is not the same per se. It is basically not as simple here and more likely than not, a lot will end up buying and selling more frequently than what is necessary, buying and selling the wrong stock, or holding on to the stock which represents lost opportunity costs.
Eh? King Yoland?
ReplyDeleteIt's man of leisure in crude Hokkien?
Yield hogs won't understand and don't care. All they care is the current % yield.
Ask them whether they can tell the difference between dividend growth stocks and high income stocks, they go, "Huh?"
LOL!
hi my friend,
ReplyDeletecare about current yield? dunno about dividend growth and high income stocks. all need to know. otherwise luan zu lai cannot one.
its different in singapore and not so basic and clear cut as in America. u have so many perpetual dividend raisers which gives quarterly payout. In america, patience is the key and bao chi is the word.
In singapore, patience is still key but its more difficult here. i dun dare say bao chi is the word.
on a serious note, for serious wealth building, one must select his components carefully.
But if invest for dividend for US stocks, tax will make a big cut. Is it worth? Or should focus on high growth stocks, eg. Facebook
ReplyDeleteNow I invest at Singapore for dividend, but for Hongkong and US, mostly for high growth potential
pardon my limited experience, dividend reinvesting with the appropiate allocation of members in a portfolio, provides a safe way for creation of meaningful wealth to the tune of 15-25%pa, which i personally feel puts one at the top of the investing hierachy. high growth stocks most often do not pay good and consistent dividends if any, and one needs to be mindful of the risks attached. i think personally i don't have much experience in tech stocks and other high growth potential stocks to comment much. But what I can see is that there are more millionaires created from the pure breed dividend investing than from growth/tech stock investing. and there are more who lost a great deal from the latter investing than the former investing.
DeleteHi Paullow,
ReplyDeletePersonally, I think it is easier in Singapore because we are not taxed on dividends. Taxes diminish our returns immediately.
lazysingaporean.blogspot.com
yes, that i agree. cos dividends paid are after tax already.
ReplyDeleteI think in america, most pple whoi are in for the long haul opt for drip so proceeds dont go to the tax man. u have century old companies paying quarterly dividends on uptrend for more than past 1/4 century and no rights issue for a lot of these oldies. imo its more strainghtforward there in terms of dividend compoundation.
in singapore, the absence of the above 3 very important factors make it a whole lot more difficult, in an young open economy with much less history to fall back on.
Hi King Yoland,
ReplyDeleteWhy are you talking about American people when we are talking about investing in Singapore. Whether you get shares or Cash Singapore will get 70% of the dividend only.
If we managed to find a US company paying 4% yield we will end up with 3% only. I think its not worth it.
hi
Deletei am just doing a comparison and reasoning. we go the NLB, we can see so many books on investing written by americans, but hardly any by local authors.
overall, worth it or not worth it, is really dependent on individual, i think.
In singapore, more punters in casino or lottery is made than pure investment for dividends.
ReplyDeleteprobably true. we can see the long crowd at the 4D/toto shop daily.
Deleteand 4D/casino, its either win or lose, nil dividends to talk about.