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Low interest yields
make stocks attractive
By Mano Sabnani, Business and Financial Consultant
Besides
the GLCs, there are actually a number of other blue chips
and second liners listed on the SGX that offer very attractive
dividend yields relative to bank deposits. The raging bear
market has brought their share prices down, even though many
of these companies are doing well, with good management and
rising profits.
Some
have hefty Section 44 tax credits to boot, which means they
can increase their payouts in the years ahead. But the market
is enveloped in pessimism and little recognition is being
given to these companies. Therein lies the opportunity. Investors
who are prepared go against current negativity and to buy
and hold these stocks will do well eventually, not just in
dividend yields, but also in capital appreciation.
Examples
of attractive blue chips are Fraser and Neave (historic price-to-earning
ratio or PER of 9.3 and dividend yield of 5.6 per cent at
current price of $7.95); Keppel Corp (PER 8.5, yield 2.5 per
cent); ST Engineering (PER 15, yield 10.7 per cent); Singtel
(PER 13.8, yield 4.1 per cent), CapitaLand (PER 9.1, yield
4.8 per cent), SGX (PER 20.5, yield 5.8 per cent), SMRT (PER
13.8, yield 5.3 per cent) and Comfort (PER 11 and yield 4.7
per cent).
Among
so-called second liners, the good ones are Chuan Hup (PER
9 and yield 10 per cent), Jaya Holdings (PER 8.5, yield 6.8
per cent), Amtek (PER 5.5 yield 4.7 per cent), HTL International
(PER 13.4, yield 2.3 per cent), Portek (PER 4.3, yield 5.7
per cent), Boardroom (PER 13, yield 6.4 per cent), China Aviation
Oil (PER 5.6 per cent, yield 6.1 per cent), Del Monte (PER
8.6, yield 5.9 per cent), IDT ( PER 6.9, yield 10.7 per cent)
and SNP (PER 10.6, yield 5.3 per cent).
The
above list is by no means comprehensive, of course. Neither
does it constitute an invitation to investors to plunge into
these stocks. Each person has to know his or her own appetite
for risk and have the awareness that direct investment in
equities is riskier than unit trusts or mutual funds.
If you have no appetite for risk, please stay focused on fixed
deposits, notwithstanding that inflation might be slowly eating
into your assets at current low interest rates. Corporate
bonds yield more, but they are generally more risky than deposits.
They also offer less upside at current low rates and yields,
unlike stocks which are at 5-year lows with good probability
of a bounce.
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