As earnings reports of listed companies flood the market, it's time to review dividend-paying stock portfolios.
With the US Federal Reserve's signalling faster rate rises this year and President Donald Trump's protectionist rhetoric and inward-looking policies, stocks with periodic dividend payments deserve a look. Such equities feature steady income payments and tend to be less volatile than stocks relying purely on capital gains.
When a stock's price falls, dividend yield goes up because the cash dividend is a larger percentage of the purchase price of each share. A high-enough dividend yield will attract investors to pile into these shares.
Given the nature of dividend plays -- prices always climb before the ex-dividend date (XD) and drop by the dividend amount or more on the ex-dividend date -- implementing a dividend capture strategy allows investors to gain more than the dividend in the short term.
Dividend capture strategies typically involve buying a stock before the ex-dividend date to qualify to collect the dividend, and then selling some time later to lock in the profit from the share price surge.
Asia Plus Securities recommends two months before the ex-dividend date as the right time for investors to scoop up high-yield dividend stocks because history has shown that investors can receive the highest return from capital gains and dividend yields at this point.
The brokerage house found stocks that pay a dividend annually under its coverage universe of 43 dividend plays have an 84% probability of providing an average return of 11.7% (capital gain plus dividend) if investors buy them two months ahead of the ex-dividend date and sell them on the XD date.
The return narrows to 9.43% if these stocks are bought a month and a half before the ex-dividend date, 6.37% if one month ahead, and a mere 0.5% if bought one week before the XD date.
For semi-annual dividend payers, they yield 7.81% in return if purchased two months before the XD date and 0.66% if bought one week ahead of the date.
Asia Plus Securities' coverage universe of 43 dividend plays has yielded a return above 3%.
The brokerage's top five picks for dividend plays based on 2016 financial performance are: Asia Sermkij Leasing Plc (ASK), Land and Houses Plc (LH), Siam City Cement Plc (SCCC), Thanachart Capital Plc (TCAP) and PTT Global Chemical Plc (PTTGC).
The picks are based on their average return (capital gains plus dividends) over the past five years when buying these stocks two months ahead of the ex-dividend date and selling them on the XD date, their solid financial positions with low debt-to-equity ratios, and at least 30% dividend payout ratios, says Therdsak Thaveeteeratham, executive vice-president of Asia Plus Securities.
The company's research found ASK offered the highest average return among the five stocks over the past five years at 12.6%, followed by property developer LH at 8.9%, SCCC at 7.8%, TCAP at 7.5% and PTTGC at 6.8%.
However, ASK is expected to offer the lowest dividend yield among the five at 2.68%, based on the closing price on Jan 20, Asia Plus Securities estimates.
The broker forecast LH will provide a dividend yield of 6.89%, TCAP at 4.33%, SCCC at 4.27% and PTTGC at 3.9%.
In terms of dividend yield alone, the brokerage predicted 18 of the 43 stocks it covers will offer a return of at least 5% for last year's operating results.
Sena Development Plc (SENA), a property developer, is expected to offer the highest dividend yield for 2016 financial results at 7.41%, followed by Intouch Holdings Plc (INTUCH) at 7.3% and Glow Energy Plc (GLOW) at 7.28%, says Asia Plus Securities.
The brokerage also predicts MCS Steel Plc (MCS) to yield 6.75%, Advanced Info Service Plc (ADVANC) at 6.37% and Kiatnakin Bank (KKP) at 6.28%.
SNC Former Plc (SNC) is projected to offer a dividend yield of 5.75%, Bangchak Petroleum Plc (BCP) at 5.67%, Krungthai Car Rent & Lease Plc (KCAR) at 5.65%, Quality Houses Plc (QH) at 5.5%, Advanced Information Technology Plc (AIT) at 5.4%, Diamond Building Products Plc (DRT) at 5.31%, Thai Tap Water Supply Plc (TTW) at 5.24% and Hana Microelectronics Plc (HANA) at 5%.
However, yields investors will receive from dividends that are payable in April to May could be lowered as these companies already paid dividends for the first half of 2016 operations.
For high-yielding annual dividend payers, Asia Plus Securities estimated Srithai Superware Plc (SITHAI) will offer a return of 5.34%, SC Asset Corporation Plc (SC) at 5.21%, IFS Capital Plc (IFS) at 5.08%, Krungthai Bank (KTB) at 4.91%, IRPC Plc (IRPC) at 4.23%, Thitikorn Plc (TK) at 4.09%, Tisco Financial Group Plc (TISCO) at 4.02% and Ratchthani Leasing Plc (THANI) at 3.96%.
"These dividend stocks should also have liquidity. It would not work to pay a good dividend if trade only becomes active once a year," says Mr Therdsak.
Kasikorn Securities (KSEC) estimated the dividend to be paid by Glow, SC, KTB, KKP, AP (Thailand) Plc (AP), SPCG Plc, IRPC, BCP, Pruksa Holding Plc (PSH), Krungthai Card Plc (KTC) and Origin Property Plc (ORI) in the coming months will exceed 3%.
Based on closing prices on Feb 20, Glow, a private power producer, is expected to yield 5.57% for its interim dividend payment for the second half of 2016 operations, SC 5.45% for 2016 performance, ORI 4.96% for its fourth-quarter earnings, KTB 4.42% for 2016, AP 4.26% for 2016, Tisco 4.18% for 2016, SPCG 4.16% for its second-half performance and KKP 3.98% for its second-half earnings.
But Jiralawan Tangivet, KSEC's managing director, says dividend plays look less enticing than they did last year, as marginal dividend growth is expected for the stocks it covers.
"Dividend plays look less attractive as our universe shows a forecast dividend payment from March to May of 182 billion baht, hardly rising from the same period last year," she says.
The company's forecast for 99 companies under its coverage calls for their aggregate dividend payment to rise only 0.18%.
Ms Jiralawan says the ICT sector's dividend payments are expected to drop by 36.7% but will be offset by energy, construction materials, banks and retail stocks, which are projected to pay higher dividends. The yield on 10-year government bonds, which surged to 2.8% last month from 2.34% year-on-year, caused dividend plays to lose their lustre.
