Agricultural Bank of China

The reason for the impressive surge in the H-shares of China bank stocks

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On May 10, 2024, the H-shares of the China Banks rose substantially. The four largest state-owned banks in China ended the day with the following closing prices: News reports that the China authorities are considering the the City’s proposals to reduce the 20% dividend withholding tax on stocks purchased through the Southbound Stock Connect account for the impressive gains in the stock … Read more

ICBC, CCB, BOC and ABC plan to begin paying interim dividends in 2024

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Four of China’s largest state-owned banks: Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BOC) and Agricultural Bank of China (ABC), have recently announced plans to pay interim dividends (half-yearly) beginning in 2024.This move signals the intent and resolve of management to continuously enhance shareholder value through increased frequency … Read more

Purchasing H-shares of Agricultural Bank of China (1288.HK) for my Dividend Income Portfolio

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Agricultural Bank of China Share Valuation Intrinsic Value

Summary

In this article, I examine the valuation of the H-share of Agricultural Bank of China (ABC 1288.HK) through the eyes of a Dividend Investor. Dividend Cash Flow analysis was used to assess the H-share of Agricultural Bank of China. The Dividend Discount Model was employed to determine its Intrinsic Value, Expected Return on Investment, and its Margin of Safety.
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Introduction

Following on from my previous article on the H-shares of the China Construction Bank (CCB), I recently purchased the H-shares of the Agricultural Bank of China (ABC). In this article, I would like to discuss the reasons why I decided to add the shares to my Dividend Income Portfolio.

As my investment philosophy evolves over time, I find myself favoring stocks which provide attractive dividends at inexpensive valuations. I used the following set of questions to help determine the Bank’s investment worthiness:

  • Does the Bank have a good long-term dividend track record?
  • Does the Bank currently offer an attractive dividend yield (above the average yield of Hang Seng Index constituents)?
  • Is the current payout ratio safe and sustainable?
  • What is the expected return on investment of the share over a 10-year period? Majority of recommendations by financial analysts tend to have a 12 month time horizon. I find the 10-year period to be more suitable for a dividend income stock, especially one which is part of a retirement dividend income portfolio.
  • Does the stock price offer a sufficient margin of safety to its intrinsic value?
  • Are the shares considered attractive when measured against the traditional value investing yardsticks? A good dividend stock with inexpensive valuation will minimize the risk of capital impairment and increase the probability of capital gains.
  • Does the stock have a history of consistent earnings growth?

With the above questions in mind, let us delve into the analysis of the stock to find the answers.

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