Now is Not The Time For You to Give Up On The Stock Market
- Original Post from The Motley Fool Sg

Fear is rampant in the stock market right now. Investors have taken it on the chin but it is not the time to give up.

Singapore’sStraits Times Index (SGX: ^STI) peaked in early May this year and proceeded to fall past the dreaded 10% mark in less than two months to enter correction territory. Today, more than six months after this year’s high, the STI is still down by around 16%.

As the downturn drags on, some investors are beginning to feel the strain. In some ways, fear has given way to exhaustion. After all, it’s been a tough year for any investor to eke out any sort of gain. Consider these statistics:

  1. Less than a quarter of the 30 companies that make up the Straits Times Index are showing positive returns for 2018.

  2. The average year-to-date return of a blue-chip stock is negative 9.7%.

Meanwhile, good news is in short supply. Instead, negative developments, such asAsian Pay TV Trust’s (SGX: S7OU) massive dividend cut, are dominating media headlines. At the face of all the mounting challenges, it is not surprising that some investors are feeling fearful — and tired too.

From the above, you can see why it is tempting to take the easy way out and give up. But you really, really shouldn’t.

Courage, Singapore Investors

Investors were feeling weary in April 2008 too.

Prior to that, the US-basedS&P 500index had peaked in October 2007 and had fallen into correction territory in less than two months. By mid-April 2008, there was no stock market recovery in sight and the index had been languishing in the doldrums for more than six months. As investors’ hearts started to waver, Motley Fool co-founders Tom and David Gardner implored our members to stay invested. In April 2008, they wrote in a memo:

“We are all touched by fear: fear of death, fear of failure, fear of what a bear market can wreak upon our retirement portfolios. But courage is forging ahead, taking action, being productive despite the fear that we feel.”

You see, our co-founders understood early on that investing is more than just numbers and a bunch of ratios. Much like today, fear was rampant in the stock market back in 2008. But as investors, we have to find the courage, despite the fear we feel, to invest.

With the benefit of hindsight, we can now see the wisdom in their timely words — that is if we had stayed invested.

From the start of April 2008, shares of companies such as local bankDBS Group (SGX: D05), airline catererSATS (SGX: S58) and vehicle test inspectionVICOM (SGX: V01) have delivered total returns of over 120%, 265%, and over 500%, respectively. Investors that exited the market back then would have missed out on these satisfying gains.

So, like Tom and David Gardner before me, I say to you:Courage, Singapore investor.

Our Promise to You

Even in uncertain markets, there is still a way to invest profitably. It’s about knowing where to find these opportunities.

We do not shy away when markets fall.

That’s why we can consistently offer our members one stock pick every month … Even as the stock market suffers from bouts of fear and exhaustion.

Since we started, we have 24 active stock recommendations. We think they will be able to weather through tough times and potentially make you wealthy over the long term.

If you want to find out what stocks to buy in these uncertain times, simply click here to get started.

$STI(^STI.IN) $DBS(D05.SI) $SATS(S58.SI) $VICOM(V01.SI) $S&P 500(^GSPC.IN)

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1 Simple Number for Understanding 3 Important Aspects of DBS Group Holdings Ltd
- Original Post from The Motley Fool Sg

DBS Group Holdings Ltd (SGX: D05), or DBS Group, is one of the three major banks based out of Singapore, along with United Overseas Bank Ltdand Oversea-Chinese Banking Corp Limited.

The choice of ROE

We’re using one metric — the return on equity, or ROE — to understand F&N’s business. This financial metric gives investors important insight into a company’s ability to generate a profit using the shareholders’ capital it has.

A ROE of 20% means a company generates $0.20 in profit for every dollar of shareholders’ capital invested. In general, the higher a company’s ROE, the more profitable it is. A high ROE can also be a sign that a company has a high-quality business.

It’s worth noting that the use of high leverage — which increases the financial risk faced by a company — can also increase a company’s ROE.

Calculating the ROE

ROE can be calculated using the following formula, which is the way many investors do it:

ROE = Net Profit / Shareholder’s Equity

ROE can also be calculated using a different approach, as shown below:

ROE = Asset Turnover x Net Profit Margin x Leverage Ratio

Calculating a company’s ROE will reveal three important things: How well a company is managing its assets, how efficient it is at turning revenue into profit, and how much financial risk it could be taking on.Click herefor more information about this formula for ROE.

With that, let’s turn our attention to the ROE of DBS Group.

The actual numbers

Asset turnover measures the efficiency of a company in using its assets to generate revenue. It is calculated by dividing a company’s total revenue by its assets. DBS Group had total revenue of S$13.2 billion and total assets of S$550.8 billion in its fiscal year ended 31 December 2018 (FY2018). This gives it an asset turnover of 0.024.

Net profit margin measures the percentage of revenue that is left as a profit after deducting all expenses.In FY2018, DBS Group had a net profit margin of 43.2%, given its net profit of S$5.7 billion and revenue of S$13.2 billion.

Lastly, we have the leverage ratio, which shows the relationship of a company’s total assets to its equity. It’s calculated by dividing total assets by equity.Ahigher ratio means a company is funding its assets with more liabilities, hence resulting in higher risk.In FY2018, DBS Group had total assets and total equity of S$550.8 billion and S$49.9 billion, respectively. This gives it a leverage ratio of 11.04 (a high leverage ratio is common for banks).

When we put all of the numbers together, we arrive at a ROE of 11% for DBS Group.

Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.

TheMotley Fool’s purpose is to help the world invest, better.Like us on Facebookto keep up-to-date with our latest news and articles.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore recommends DBS Group Holdings Ltd, United Overseas Bank Ltd, and Oversea-Chinese Banking Corp Limited.


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DBS Group Holdings Ltd’s 2018 Earnings: Record Year With Continued Growth Expected in 2019
- Original Post from The Motley Fool Sg

DBS Group Holdings Ltd (SGX: D05) achieved another good quarter to end 2018 as net profit rose 8% from a year ago on the back of higher net interest income. For the full year, net profit was 28% to S$5.6 billion, a record high. Most notably, return on equity for the full year rose by more than two percentage points to 12.1%, the highest since 2007.

Here are the most important takeaways from its fourth quarter and full year results.

The numbers

Fourth quarter:

  • Total income increased 6% to S$3.2 billion

  • Profit before allowances was up 3% to S$1.7 billion

  • Allowances declined 9%

  • Net profit increased 8% to S$1.3 billion

Full year:

  • Total income rose 11% to a record S$13.2 billion

  • Profit before allowances up 9% to a record S$7.4 billion

  • Net profit up 28% to S$5.6 billion

What’s behind these numbers

In the fourth quarter, net interest income rose 11% to S$2.3 billion, due to both loan volume growth and higher net interest margin. However, non-interest income fell 4% due to declines in investment banking, wealth management, and brokerage fees.

That said, on a quarter-on-quarter basis, fourth-quarter net profit was actually 7% lower than the previous quarter. The decline was mostly due to weakened treasury market, which fell 60%.

On a full-year basis, the record net profit was due to higher net interest income, non-interest income, and lower allowances compared to a year ago. The consolidation on retail and wealth management business of ANZ also contributed to higher fee and interest income.

By business unit, consumer banking and wealth management rose 21%, while institutional banking grew 9%. The only blotch was again treasury market income which declined 21% for the full year.

Higher net interest income driving growth

Net interest income was the main driving force behind the strong numbers this year. Net interest income increased 15% from a year ago, compared to net fee and commission income which grew 6%.

The higher net interest income was due to the widening of the net interest margin and higher loan volume. The chart below shows the net interest margin over the course of the last two years.

Source: DBS Group Holdings 2018 Q4 Results CFO Presentation

In 2018, there was a steady rise in net interest margin, in line with the Fed rate hikes last year. However, with the Fed’s more hawkish stance this year, net interest margin rates this year are unlikely to rise as fast.

Also, loan volumes increased 6% this year or S$21 billion, led by non-trade corporate and consumer loans. In the fourth quarter, loans rose S$5 billion or 2% from the previous quarter.

Fee income up

Fee income in 2018 continued its strong growth trajectory, rising 8.5% from a year ago. Fourth quarter fee income inched up 3% from a year ago. The chart below breaks down the bank’s fee income each quarter over the past two years.

Source: DBS Group Holdings 2018 Q4 Results CFO Presentation

The chart shows strong growth in wealth management, transaction services, and card fees earned in 2018.

Strong balance sheet

Impressively, DBS has negotiated its loan volume growth without weakening its balance sheet. Its allowance coverage was 98% (a ratio close to or above 100% is desirable). Deposits increased 2% sequentially in the fourth quarter and 5% from a year ago in constant currency terms, giving the bank a larger platform to increase its loan volume.

The common equity tier 1 ratio, a commonly used metric to measure the liquidity of a bank, increased by 0.6 percentage points to 13.9%, well above the regulatory minimum of 6.5%.

Dividends and looking ahead

The board has proposed a final dividend of 60 cents per share that will bring the payout to S$1.20 per share for the full year. Based on its full-year earnings per share of S$2.15, the bank has a dividend payout ratio of 0.55.

In his presentation to analysts, DBS chief executive Piyush Gupta said that he expects the bank to have mid-single digit loan growth and continued net interest margin progression in 2019, with high single-digit income growth this year. Despite reaching a decade high return on equity (ROE), he still expects continued ROE improvement this year.

He added:

“We achieved financial results befitting our fiftieth anniversary, a year when we were recognised as the world’s best bank and best digital bank. Return on equity of 12.1% was near the historical high of 2007 when interest rates were twice the levels today and capital requirements less stringent. The structural improvements we have made to the profitability of our franchise – a shift towards higher returns business, deeper customer relationships and more nimble execution – put us in good stead to navigate the challenges of the coming year.”

The Motley Fool's purpose is to help the world invest, better. Click here nowfor your FREE subscription to Take Stock -- Singapore, The Motley Fool's free investing newsletter. Written by David Kuo, Take Stock -- Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.

Like us on Facebook to keep up to date with our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on DBS Group Holdings Ltd. Motley Fool Singapore contributor Jeremy Chia owns shares in DBS Group Holdings Ltd.


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The Weekly Nibble: Best Dividend Shares
- Original Post from The Motley Fool Sg

Here are some of the most popular articles that have appeared on The Motley Fool Singapore’s website for the week.

Singapore’s Top 5 Dividend Shares Among the World’s Best

Do you like income stocks?

In this article, I looked at the top five Singapore-listed companies that are part of the FTSE All-World High Dividend Yield Index sporting the highest dividend yields. The FTSE All-World High Dividend Yield Index contains 1,389 globally-listed shares that have a higher-than-average dividend yield. The index does not include real estate investment trusts (REITs) and stocks that are forecast to pay no dividend over the next 12 months.

Companies discussed in the article include Hutchison Port Holdings Trust (SGX: NS8U), StarHub Ltd (SGX: CC3), Singapore Telecommunications Limited (SGX: Z74), M1 Ltd (SGX: B2F) and Venture Corporation Ltd (SGX: V03).

2 Singapore REITs I Am Watching This Week

My Foolish colleague, Jeremy Chia, touched on why he kept a lookout for two REITs – Keppel DC REIT (SGX: AJBU) and CapitaLand Mall Trust (SGX: C38U) – when they released their earnings during the week.

Keppel DC REIT released its earnings on 22 January while CapitaLand Mall Trust announced its financial results on 23 January.

3 Singapore Blue Chips That Have More Than Doubled Their Profits In The Last Decade

In this piece, Lawrence Nga explored a total of three Straits Times Index (SGX: ^STI) stocks that have more than doubled their profits in the last 10 years. Do jump into the article to know what the companies are.

Maximise dividends on your REITs with our brand-new Complete Guide To Buying The Best Singapore REITs. We reveal everything we think you need to know about finding the best REITs that hands you a fat dividend cheque ...even if you have no REITs experience at all! Get instant access to your 100% FREE, actionable, 42-page PDF guide here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of CapitaLand Mall Trust. Motley Fool Singapore contributor Sudhan P owns units in CapitaLand Mall Trust.

$STI(^STI.IN) $Keppel DC Reit(AJBU.SI) $M1(B2F.SI) $CapitaMall Trust(C38U.SI) $StarHub(CC3.SI) $HPH Trust USD(NS8U.SI) $Venture(V03.SI) $SingTel(Z74.SI)

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6 Things I’m Pretty Sure Will Happen In The Financial Markets In 2019
- Original Post from The Motley Fool Sg

Investing is a game of probabilities – there are no sure things. But there are some things that I am pretty certain will happen in 2019.

1. Individual stocks will be volatile, regardless of how the overall market does. After the painful fourth quarter of 2018, it’s probably hard to remember that 2017 was an incredibly calm year for the US stock market. For instance, the S&P 500’s maximum peak-to-trough loss (this is known as the maximum drawdown) in that year was just 2.8%. But in 2017,’s maximum drawdown was 11%, despite the company’s share price gaining 56% for the whole year. Volatility in stocks is a feature, not a bug.

2. The Federal Reserve will either raise, maintain, or drop benchmark interest rates in the US. You must be thinking, “Gee – thanks, Captain Obvious!” I write this for a reason. I understand that plenty of eyeballs are on the Fed’s interest rate moves, but the way we invest should not change based on what the US’s central bank is doing.

Singapore’s banking trio of DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Limited (SGX: O39), and United Overseas Bank Ltd (SGX: U11) have all recently said that rising interest rates, up to a certain extent, are likely to be a net positive for them. But, all three have also managed to grow their businesses substantially over the past decade even when interest rates have declined. The quality of a company’s business and the growth opportunities that are present matters far more to the company’s share price than what the Fed is doing.

3. The US and China will call a truce, maintain status quo, or escalate their current trade squabbles. I can hear your thoughts: “Again, Captain Obvious!?” But bear with me, because I state this for another good reason. In his 1994 Berkshire Hathaway annual shareholders’ letter, Warren Buffett wrote one of my favourite investing passages:

“We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%.

But, surprise – none of these blockbuster events made the slightest dent in Ben Graham’s investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, then, if we had let a fear of unknowns cause us to defer or alter the deployment of capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist.”

4. Many investors will feel an urgent need to make drastic changes to their investment portfolios for 2019 based on the volatility experienced in the second half of 2018. That’s a mistake, assuming that the portfolio built in 2018 was done so based on sound investing principles.

Behavioral economist Ofer Azar once studied the actions of more than 300 football goalkeepers during penalty kicks. Azar found that goalkeepers who jumped left successfully saved a penalty kick just 14.2% of the time, while those who jumped right had a success rate of a mere 12.6%. But, goalkeepers who stayed in the center of the goalmouth had a successful penalty-saving rate of 33.3%. What’s interesting though, is that only 6% of the 300-plus goalkeepers studied chose to remain in the center. Azar’s study highlights the presence of an action bias in us, where we think doing something is better than nothing.

Azar linked his football results to the financial markets, and discovered that this action bias also manifests strongly in investing – when markets become volatile, investors develop a strong urge to do something. But doing nothing is often the right thing to do. The statistics bear this out. Going back to Amazon, the company’s share price has gained an astonishing 3,000% over the past decade. But as the chart below shows, the company’s share price has routinely suffered maximum drawdowns of 30% or more in that period. An investor who succumbed to the urge to sell at the onset of volatility in Amazon’s share price would have lost out on massive gains.

Source: S&P Global Market Intelligence

Charlie Munger, the Robin to Buffett’s Batman, once said: “If you buy a few great companies, then you can sit on your ass. That’s a good thing.”

5. There will be something to worry about in the financial markets. The legendary investor Peter Lynch once said that “There is always something to worry about. Avoid weekend thinking and ignore the latest dire predictions of the newscasters. Sell a stock because the company’s fundamentals deteriorate, not because the sky is falling.”

6. There are 7.6 billion people in the world today, and the vast majority of them will wake up each morning wanting to improve the world and their lot in life. This motivation is what ultimately powers the growth of the global economy and financial markets. There will be idiots who will shake things up from time to time, but we should have some faith in the collective positivity of mankind. A bet on the stock market is a long-term view that we humans are always striving to improve our lives in aggregate.

Meanwhile, there are 28 surprising and important things we think every Singaporean investor should know—and we’ve laid them all out in The Motley Fool Singapore’s new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge—simply click here now to claim your copy.

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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chong Ser Jing Chong Ser Jing owns shares in, Berkshire Hathaway (Class B), and Oversea-Chinese Banking Corporation. The Motley Fool Singapore has recommendations on, Berkshire Hathaway (Class B), DBS Group Holdings, United Overseas Bank, and Oversea-Chinese Banking Corporation.

$DBS(D05.SI) $OCBC Bank(O39.SI) $UOB(U11.SI)

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Singapore’s Top 10 Dividend Shares Among the World’s Best
- Original Post from The Motley Fool Sg

There are 26 Singapore-listed shares in the FTSE All-World High Dividend Yield Index. This global dividend yield index contains 1,389 globally-listed shares that have a higher-than-average dividend yield. The index excludes real estate investment trusts (REITs) and stocks that are forecast to pay no dividend over the next 12 months.

Here, let’s look at the next five Singapore-listed companies – part of the FTSE All-World High Dividend Yield Index – that have the highest dividend yields (yield data as of 18 January 2019). For the first five, you can head here.

Cream of the crop

Coming in sixth is Frasers Property Ltd (SGX: TQ5) with a dividend yield of 4.9%. The property developer has maintained a dividend per share of 8.6 cents from FY2014 (financial year ended 30 September 2014) to FY2018. The company has a dividend policy of paying up to 75% of its yearly net profit after tax as dividend.

ComfortDelGro Corporation Limited (SGX: C52) is next in line with 4.9% in dividend yield. For 2017, the land transport giant upped its dividend payout to 10.4 cents per share from 10.3 cents per share in the prior year. Will the company increase its dividend again for 2018? We will know for sure when ComfortDelGro announces its full-year financial results in February.

DBS Group Holdings Ltd (SGX: D05) takes the eighth position with a dividend yield of 4.8%. In 2017, DBS’ dividend per share surged 138% to S$1.43, up from S$0.60 in 2016. The 2017 dividend includes a special dividend per share of S$0.50. Without this special dividend, the dividend in 2017 would have climbed by a lesser amount of 55% year-on-year, but still commendable nonetheless. In the second quarter of 2018, DBS paid an interim dividend of S$0.60 a share, 82% higher than the interim dividend paid in 2017.

With a dividend yield of 4.7% and taking the ninth spot is SIA Engineering Company Ltd (SGX: S59). For its financial year ended 31 March 2018 (FY2017/18), the company paid a total dividend of 13 cents per share. In FY2016/17, it dished out 18 cents per share in total dividend, which includes a special dividend of 5 cents.

Singapore’s bourse operator, Singapore Exchange Limited (SGX: S68), takes the final spot. The company paid out a dividend of 30 cents per share for its fiscal year ended 30 June 2018 (FY2018). The dividend payout marked a 7% increase from the dividend payment of 28 cents per share dished out in FY2017. To know more about Singapore Exchange’s dividends, such as its dividend policy and dividend sustainability, you can take a look at the articlehere.

The Foolish takeaway

As prudent investors, we should never invest based on high dividend yields alone. The dividend yield tells us nothing about the sustainability of a firm’s dividend. What we should do instead is to look for companies that cangrow, or at least sustain, their dividends year-on-year. The above list, though, can serve as a basis for further research before you invest in any of them.

$World Precision(B49.SI) $Best World(CGN.SI) $ComfortDelGro(C52.SI) $DBS(D05.SI) $SIA Engineering(S59.SI) $SGX(S68.SI) $Frasers Property(TQ5.SI)

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