Dividend Investing

Broker Target Prices for Ping An (02318.HK) – October 2021

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Broker Target Prices for Ping An (02318.HK)

Ping An Insurance is a Chinese insurance stock which I hold in my Dividend Income Portfolio. I have previously published an article on Ping An in which I gave an estimate of Ping An’s Intrinsic Value, Margin of Safety and Return on Investment. In this article I would like to share the recent price targets … Read more

Purchasing H-shares of China CITIC Bank (0998.HK) for my Dividend Income Portfolio

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China CITIC Bank - Share Valuation

Summary

In this article, I examine the valuation of the H-share of China CITIC Bank (0998.HK) from the view point of a Dividend Investor. The Dividend Discount Model (DDM) is used to determine its Intrinsic Value, Expected Return on Investment, and its Margin of Safety. DDM is a form of Discounted Cash Flow Analysis in which the type of cash flow used in the analysis is the Company’s regular dividend payments, discounted at the appropriate rate of return to determine the Intrinsic Value of the stock.

Introduction

The recent Evergrande debt crisis has resulted in a substantial sell down in the Hong Kong equities market, with the bulk of the price decline hitting China H-shares. A few companies on my watch list experienced price corrections which brought them into value stock territory, at least that is my humble opinion. I have recently published articles on 2 of them, namely Ping-An Insurance, Agricultural Bank of China. In this article, I would like to share my thoughts on another recent addition to my Dividend Income Portfolio, China Citic Bank (0998.HK).

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 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 company to find the answers.

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Estimating the Intrinsic Value, Return on Investment and Margin of Safety of Ping An using the Dividend Discount Model

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Ping An - Share Valuation

Summary

This article looks at the valuation of Ping An shares trading on the Stock Exchange of Hong Kong (Ticker: 2318.HK). The Dividend Discount Model is used to estimate the share’s Intrinsic Value, Expected Return on Investment, and its Margin of Safety.

Continue reading to learn more.

Introduction

Ping An - 3rd Largest Insurance Company in the world
Ping An – 3rd Largest Insurance Company in the world by market capitalization

Ping An is the 3rd largest insurance company in the world by market capitalization and by the same measure, is the largest insurance company in Mainland China. Ping An has its humble beginning in Shenzhen when it was founded in 1988 at China’s first joint-stock company. Since then, its business has grown by leaps and bounds and it has diversified into other profitable business ventures, including fin-tech and banking. The company was successfully listed on the Stock Exchange of Hong Kong on 24th June 2004.

Ping An shares hit its 52-week high on the Hong Kong Stock Exchange in January this year. Since that price top, the share has undergone a prolonged correction, culminating in its recent 52-week low 49.00HK$ per share on 21st September 2021. All in all, the share price has declined more than 50% from its year high.
Such a massive correction in one of the largest insurance companies in the world has certainly attracted the attention of many in the investment community. The time is right to have a closer look at the current valuation of Ping An (2318.HK) shares trading on the Stock Exchange of Hong Kong.

Dividend Discount Model is one of many methods for valuing stocks. The procedure is similar to the Discounted Cash Flow model, with the free cash flow being substituted dividends as the cash flowing to the investor. One advantage of using this method is that dividends data are easily available from the company’s financial reports. It is also my preferred valuation method for dividend-paying stocks. The reason being that dividends are tangible income to the investor and it represents the return of investment and return on investment. The cash from dividends allows the investor to reinvest the proceeds into the same stock or into other more attractive stocks to achieve the all important compounding effect.

This article describes the use of the Dividend Discount Model to determine the Intrinsic Value, Expected Return on Investment, and Margin of Safety of Ping An (2318.HK) shares trading on the Stock Exchange of Hong Kong.

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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.
Continue reading to learn more.

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.

Read more

I purchased H-shares of the China Construction Bank (CCB) for my Dividend Income Portfolio. Here are the reasons why.

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Summary

In this article, I take a deep look at the stock valuation of the H-share of China Construction Bank (CCB 0939.HK) through the eyes of a Dividend Investor. Dividend Cash Flow analysis was used to evaluate the H-share of China Construction Bank. The Dividend Discount Model was employed to estimate its Intrinsic Value, Expected Return on Investment, and its Margin of Safety.
Continue reading to learn more.

Introduction

Following my previous article on the H-shares of the Bank of China (BOC), I also recently purchased the H-shares of the China Construction Bank (CCB). Here, I would like to discuss the rationale behind the investment decision to add China Construction Bank to my dividend income portfolio.

As my investment philosophy evolves over time, I find myself preferring stocks which provide attractive dividend income streams at inexpensive valuations. I used the following set of questions to help determine the investment worthiness of China Construction Bank:

  • Does the stock have a good long-term dividend track record?
  • Does the stock currently offer an attractive dividend yield (above the average yield of Hang Seng Index constituents)?
  • Is the current payout ratio of China Construction Bank sustainable?
  • What is the expected return on investment of China Construction Bank 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 H-shares of China Construction Bank (CCB) 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.

Read more

Dividend Investing – How to use Discounted Cash Flow Analysis to value Dividend Stocks

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Discounted Cash Flow Analysis, Dividend Discount Model

What is Discounted Cash Flow Analysis (DCA)?

Discounted Cash Flow Analysis or DCA is one of the best methods to estimate the worth of an investment. In DCA, the value of an investment is determined by the sum of its future cash flows discounted back to present value at an appropriate discount rate or a required rate of return for the investor.

What is the Discounted Cashflow Model (DDM)?

For dividend paying stocks, the type of cash flow used in the analysis is the stock’s regular dividend payments and the Dividend Discount Model (DDM) Cash Flow Analysis is used to determine the Intrinsic Value of the stock.

There are 2 types of future cash flows which determine the Intrinsic Value of a Dividend Stock:

  • Future regular dividend payments over the Holding Period
  • Expected Future Stock Price at the end of the holding period
    • Depending on whether there is capital appreciation in the stock price over the holding period, this cashflow can either add or substract from the Intrinsic Value of the stock.

These two cash flow components, when discounted back to the present value at the appropriate discount rate, determine the Intrinsic Value of the Dividend Stock.

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