Why High-Dividend Stocks Are a Smart Investment Choice
Investing in stocks with a dividend yield above 5% can be an attractive strategy for many investors, particularly those seeking steady income and long-term growth. Dividends are regular payments made by companies to their shareholders from profits, and a higher yield indicates a higher return on investment from these payments relative to the stock price.
1. Reliable Income Stream
One of the primary benefits of investing in high-dividend-yield stocks is the reliable income stream they provide. For retirees or those seeking a steady cash flow, dividends can offer a predictable source of income, often surpassing the returns of traditional savings accounts or bonds. This income can be reinvested to compound growth or used to cover living expenses, providing financial stability.
2. Lower Risk
Stocks with high dividend yields often belong to well-established companies with stable earnings. These companies, often referred to as “blue-chip” stocks, tend to be less volatile and more resilient during market downturns. Their ability to consistently pay dividends is a sign of financial health and stability, making them less risky compared to high-growth stocks that do not pay dividends.
3. Inflation Hedge
Dividend-paying stocks can serve as a hedge against inflation. As the cost of living increases, companies with strong, consistent earnings typically increase their dividend payouts over time. This helps investors maintain their purchasing power, unlike fixed-income investments whose payouts remain constant regardless of inflation.
4. Compounding Returns
Reinvesting dividends can significantly enhance total returns over time. By purchasing additional shares with dividend payments, investors can benefit from compounding, where both the original investment and the reinvested dividends generate additional earnings. This snowball effect can lead to substantial portfolio growth, particularly over long investment horizons.
5. Market Performance
Historically, stocks with higher dividend yields have outperformed the broader market, providing not only income but also capital appreciation. This dual benefit makes them a compelling choice for investors seeking a balanced approach to growth and income.
How Many Philippine Blue-Chips Have a Dividend Yield Above 5%?
As of May 24, 2024, I’ve checked which of the 30 Philippine blue-chip stocks have a dividend yield of 5% and above. Only 6 out of 30 made it to my list.
Note that a dividend yield above 5% isn’t enough for me to say that it’s logical to buy shares of a stock. The stock’s price must be higher than its 10-day simple moving average. Also, it has to have a bullish Dominant Range Index (as trading happens or as of EOD) and a bullish Market Sentiment Index (either EOD or MTD).
The Dominant Range Index and Market Sentiment Index are my proprietary indicators. You won’t find them on TradingView or any broker’s charting tool.
In this free report, I’ll show you the month-to-date (MTD) Market Sentiment Index of those 6 blue-chip stocks with a dividend yield above 5% as of May 24, 2024.
Semirara Mining and Power Corporation (SCC): 21.18% Div Yield (TTM)
Market Sentiment Index: BEARISH
42 of the 83 participating brokers, or 50.60% of all participants, registered a positive Net Amount
34 of the 83 participating brokers, or 40.96% of all participants, registered a higher Buying Average than Selling Average
83 Participating Brokers’ Buying Average: ₱32.15606
83 Participating Brokers’ Selling Average: ₱32.40902
12 out of 83 participants, or 14.46% of all participants, registered a 100% BUYING activity
7 out of 83 participants, or 8.43% of all participants, registered a 100% SELLING activity
DMCI Holdings (DMC): 13.09% Div Yield (TTM)
Market Sentiment Index: BEARISH
44 of the 81 participating brokers, or 54.32% of all participants, registered a positive Net Amount
38 of the 81 participating brokers, or 46.91% of all participants, registered a higher Buying Average than Selling Average
81 Participating Brokers’ Buying Average: ₱10.85596
81 Participating Brokers’ Selling Average: ₱10.91768
20 out of 81 participants, or 24.69% of all participants, registered a 100% BUYING activity
10 out of 81 participants, or 12.35% of all participants, registered a 100% SELLING activity
LT Group (LTG): 11.75% Div Yield (TTM)
Market Sentiment Index: BEARISH
33 of the 73 participating brokers, or 45.21% of all participants, registered a positive Net Amount
34 of the 73 participating brokers, or 46.58% of all participants, registered a higher Buying Average than Selling Average
73 Participating Brokers’ Buying Average: ₱10.09184
73 Participating Brokers’ Selling Average: ₱10.10776
11 out of 73 participants, or 15.07% of all participants, registered a 100% BUYING activity
15 out of 73 participants, or 20.55% of all participants, registered a 100% SELLING activity
PLDT (TEL): 6.69% Div Yield (TTM)
Market Sentiment Index: BEARISH
27 of the 96 participating brokers, or 28.13% of all participants, registered a positive Net Amount
30 of the 96 participating brokers, or 31.25% of all participants, registered a higher Buying Average than Selling Average
96 Participating Brokers’ Buying Average: ₱1410.79317
96 Participating Brokers’ Selling Average: ₱1414.24979
9 out of 96 participants, or 9.38% of all participants, registered a 100% BUYING activity
26 out of 96 participants, or 27.08% of all participants, registered a 100% SELLING activity
Metropolitan Bank & Trust Company (MBT): 6.23% Div Yield (TTM)
Market Sentiment Index: BEARISH
35 of the 96 participating brokers, or 36.46% of all participants, registered a positive Net Amount
18 of the 96 participating brokers, or 18.75% of all participants, registered a higher Buying Average than Selling Average
96 Participating Brokers’ Buying Average: ₱69.54674
96 Participating Brokers’ Selling Average: ₱70.74547
5 out of 96 participants, or 5.21% of all participants, registered a 100% BUYING activity
20 out of 96 participants, or 20.83% of all participants, registered a 100% SELLING activity
Manila Electric Company (MER): 5.35% Div Yield (TTM)
Market Sentiment Index: BEARISH
24 of the 77 participating brokers, or 31.17% of all participants, registered a positive Net Amount
22 of the 77 participating brokers, or 28.57% of all participants, registered a higher Buying Average than Selling Average
77 Participating Brokers’ Buying Average: ₱371.01351
77 Participating Brokers’ Selling Average: ₱372.01893
6 out of 77 participants, or 7.79% of all participants, registered a 100% BUYING activity
24 out of 77 participants, or 31.17% of all participants, registered a 100% SELLING activity
Verdict
Unfortunately, all 6 blue-chips received a bearish MTD Market Sentiment Index score. This means that while they are the most generous dividend-issuing companies from the list of 30 blue-chips, my methodology doesn’t find it logical to buy the stocks yet as their individual share prices are still likely to continue going down. My methodology is hinting that we should watch out for data-driven signs of reversal for now.
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