Investing in dividend-paying stocks in Malaysia is a great way to build long-term wealth. The dividend stock that you own for every share you paid is a portion of the company’s earnings. However, it’s easy to get caught up in the search for a big yield of what makes a great dividend investment.
Many people invest in dividend stocks to take advantage of the steady income and the opportunity of reinvesting this dividend to purchase an additional share of stocks.
Since the dividends are paid only by financially stable companies, investors find it easy to invest and enjoy the periodic dividends payments- a success win for investors.
Up until this point, it may seem like a straightforward system of finding an organization that pays dividends and reinvesting those dividends throughout the years so as to fabricate your total assets.
It isn’t as easy as it seems to be. You have to be confident enough about finding quality dividend stock in Bursa Malaysia market.
So, how do you pick up the best dividend stocks?
Here, we are providing you with the simple steps to find the best dividend stocks this year.
7 Steps To Find Dividend Stocks Bursa Malaysia
1. Company Dividend History
You should adjust the number of consecutive annual increases to your choice. For example, some investors will only consider companies that have increased their dividends for 25 years or more. But you might be flexible here. For example, Nestlé Malaysia has paid an increasing dividend per share for the last 14 years. It’s dividends increase from RM0.821 per share to RM2.35 in 2013. This implies that dividend has grown up, on average, 8.4% a year in the last 13 years.
2. The Company’s Payout Ratio
When coming to a company’s payout ratio it should be not more than 80% of its earning per share. If a company earns $0.50/share and is paying a dividend of $0.75/share, it could be in trouble. It is most important to differentiate the earnings per share and the dividends per share. During the past 13 years, the highest Dividend Payout Ratio of Bursa Malaysia Bhd was 2.18. The lowest was 0.00. And the median was 0.90.
3. Low Capital Expenditure
The organization has a steady free income will probably pay the profit to its investors.
4. Loads Of Cash
To Check the company’s current ratio, which calculates its potential to meet short-term obligations. The “current ratio” is the ratio of current assets to current liabilities. If a company’s current ratio is greater than 1, it’s in a good state.
5. Stocks Price Stability & Different Sectors
6. Dividend Yield Percentage
There are many good dividend-paying stocks out there, but investors should factor in the price of any companies paying dividend yield at least 3%.
7. Business That Generate Good ROE
ROE is the return a business make using the capital they have. Similar to how your savings account give you interest. Generally you will prefer a business than can generate >15% of ROE. High ROE and long consistency normally means dividend will grow over time.