1 00:00:02,869 --> 00:00:05,170 Speaker 1: You're listening to AC N A podcast. 2 00:00:07,340 --> 00:00:10,549 Speaker 1: Hey, hey, everyone. It's Andrea Heng here on the Money 3 00:00:10,560 --> 00:00:15,720 Speaker 1: Talks podcast with your weekly dose of advice on personal finance. Now, 4 00:00:15,729 --> 00:00:19,439 Speaker 1: if you're new here, hit the subscribe button on wherever 5 00:00:19,450 --> 00:00:23,530 Speaker 1: you are listening to us, Spotify, youtube music or Apple Pod. 6 00:00:23,909 --> 00:00:26,899 Speaker 1: This is just so that you will be the first 7 00:00:26,909 --> 00:00:29,979 Speaker 1: to know. You'll get that little ping alert whenever a 8 00:00:29,989 --> 00:00:33,900 Speaker 1: new episode drops. Now, I have my producer, Juani here 9 00:00:33,909 --> 00:00:36,299 Speaker 1: with me today so I am going to get her 10 00:00:36,310 --> 00:00:39,069 Speaker 1: to quickly give me the top financial headlines this week. 11 00:00:39,080 --> 00:00:43,220 Speaker 1: Take it away, June, Andrea Heng. Yes. Are you a Boomer? 12 00:00:43,229 --> 00:00:46,900 Speaker 1: How dare you ask me this question? No, I am not. 13 00:00:46,918 --> 00:00:49,540 Speaker 1: I'm just kidding. Yes, I know you're not. 14 00:00:49,830 --> 00:00:53,220 Speaker 1: But anyway, this just in baby boomers here in Singapore 15 00:00:53,229 --> 00:00:57,209 Speaker 1: are worried. Oh, why? According to a Euromonitor International survey 16 00:00:57,220 --> 00:01:01,959 Speaker 1: conducted early this year, about only 55% of the baby 17 00:01:01,970 --> 00:01:06,870 Speaker 1: boomers are comfortable with their financial situation in 2023 18 00:01:07,330 --> 00:01:12,660 Speaker 1: and they are generally pessimistic about their personal finances. In fact, 19 00:01:12,830 --> 00:01:16,970 Speaker 1: about 26% believe that the situation will get worse. Oh, 20 00:01:17,040 --> 00:01:20,910 Speaker 1: my goodness. That's not very good. You can't blame them though. Right. 21 00:01:20,919 --> 00:01:25,379 Speaker 1: Because not only are the Boomers living longer but their 22 00:01:25,389 --> 00:01:29,129 Speaker 1: parents are also living longer. So, cost of living is 23 00:01:29,139 --> 00:01:32,069 Speaker 1: also perpetually on the rise. That's right. And that's why 24 00:01:32,080 --> 00:01:34,550 Speaker 1: Boomers are more careful when it comes to the spending. 25 00:01:35,010 --> 00:01:38,629 Speaker 1: They are also spending more on health goods and medical services. 26 00:01:38,639 --> 00:01:43,110 Speaker 1: Which understandable and also on education. Oh, that's good. Yay. 27 00:01:43,120 --> 00:01:47,339 Speaker 1: For upskilling. Interesting. All right. What's next? All hot Chris. 28 00:01:47,589 --> 00:01:52,300 Speaker 1: What is the hottest company in the world right now? Oh, wow. Ok. 29 00:01:52,309 --> 00:01:56,459 Speaker 1: I know it's not Apple anymore. It's NVIDIA. That's right. 30 00:01:56,870 --> 00:02:00,349 Speaker 1: It's been constantly in the news recently first for taking 31 00:02:00,360 --> 00:02:03,709 Speaker 1: over Apple and Microsoft to become the world's most valuable 32 00:02:03,790 --> 00:02:07,809 Speaker 1: company, but only for a short while. So NVIDIA makes chips. Well, 33 00:02:07,819 --> 00:02:10,649 Speaker 1: not the kind that we like to eat, but the 34 00:02:10,660 --> 00:02:14,149 Speaker 1: ones that are really important. Ok. They are the chips 35 00:02:14,160 --> 00:02:18,508 Speaker 1: that power, the oncoming A I tsunami, which is why 36 00:02:18,520 --> 00:02:23,050 Speaker 1: everyone is asking how can I get a piece of NVIDIA. 37 00:02:23,059 --> 00:02:25,570 Speaker 1: So that's the interesting thing. So the company's stock has 38 00:02:25,580 --> 00:02:28,910 Speaker 1: been on a crazy climb according to Forbes. If you 39 00:02:28,919 --> 00:02:32,448 Speaker 1: invested $10,000 in the company five years ago, 40 00:02:32,710 --> 00:02:39,350 Speaker 1: that would be worth $345,000 today. My goodness. But at 41 00:02:39,360 --> 00:02:42,059 Speaker 1: the time of this recording things are looking a little 42 00:02:42,070 --> 00:02:44,709 Speaker 1: less rosy. Ok. So you're telling me there's a bit 43 00:02:44,720 --> 00:02:47,669 Speaker 1: of bad news on the front, the stock plunge that's 44 00:02:47,679 --> 00:02:51,448 Speaker 1: my guess correct. OK. That's why you're the journalist, the 45 00:02:51,460 --> 00:02:55,029 Speaker 1: stock has gone down 13% from its peak losing more 46 00:02:55,038 --> 00:02:56,089 Speaker 1: than 500 billion 47 00:02:56,179 --> 00:02:59,220 Speaker 1: in US dollars in market value. Ok. So then the 48 00:02:59,229 --> 00:03:02,960 Speaker 1: big golden question is, what will this mean for investors 49 00:03:02,970 --> 00:03:06,600 Speaker 1: of NVIDIA? Naturally, they will be a lot more cautious now, right? 50 00:03:06,850 --> 00:03:09,519 Speaker 1: But one thing is for sure, even though this tech 51 00:03:09,529 --> 00:03:12,470 Speaker 1: darling has now moved down to the pecking order to 52 00:03:12,479 --> 00:03:15,918 Speaker 1: number three, the story isn't quite over yet. I'm sure 53 00:03:15,929 --> 00:03:19,538 Speaker 1: I agree here's to looking forward to more NVIDIA stories. 54 00:03:21,550 --> 00:03:27,029 Speaker 1: So you like a particular company, you find its value agreeable. 55 00:03:27,038 --> 00:03:29,750 Speaker 1: You know, you like what it does, who its founder 56 00:03:29,758 --> 00:03:33,990 Speaker 1: or CEO is or maybe you just like the logo, 57 00:03:34,000 --> 00:03:36,619 Speaker 1: no harm in that. And perhaps you like it so 58 00:03:36,630 --> 00:03:39,949 Speaker 1: much that you want to own a piece of it. 59 00:03:40,149 --> 00:03:42,929 Speaker 1: One of the most common ways is to become a 60 00:03:42,940 --> 00:03:45,020 Speaker 1: shareholder and buy the company stock. 61 00:03:45,289 --> 00:03:47,910 Speaker 1: But can you only get a piece of a publicly 62 00:03:47,919 --> 00:03:51,440 Speaker 1: listed company? And how do you go about owning a 63 00:03:51,449 --> 00:03:55,020 Speaker 1: piece of that company? Let's ask Abel Lim, he is 64 00:03:55,029 --> 00:03:59,610 Speaker 1: head of Wealth Management Advisory and strategy at UOB. Welcome 65 00:03:59,619 --> 00:04:00,389 Speaker 1: to Money talks. 66 00:04:00,720 --> 00:04:03,029 Speaker 2: Thank you very much for the privilege of being here. 67 00:04:03,039 --> 00:04:03,259 Speaker 1: It 68 00:04:03,270 --> 00:04:06,300 Speaker 1: is absolutely my pleasure. So as a start, give us 69 00:04:06,309 --> 00:04:09,289 Speaker 1: the sharper summary of what a dividend stock 70 00:04:09,300 --> 00:04:09,649 Speaker 1: is. 71 00:04:09,679 --> 00:04:11,029 Speaker 2: That's actually a really good question. 72 00:04:11,205 --> 00:04:13,195 Speaker 2: So when you buy into a company, you're buying an 73 00:04:13,205 --> 00:04:16,834 Speaker 2: equity of that company, the future earnings of that company, 74 00:04:16,845 --> 00:04:19,744 Speaker 2: that's when you become an equity holder in that company. 75 00:04:19,894 --> 00:04:24,454 Speaker 2: So the typical process of identifying a equity still persists. 76 00:04:24,464 --> 00:04:26,815 Speaker 2: So in other words, you either have a top down approach, 77 00:04:26,825 --> 00:04:29,875 Speaker 2: looking at the macros, looking at the industry that is 78 00:04:29,885 --> 00:04:33,195 Speaker 2: participating in and why you should be buying into that company. 79 00:04:33,204 --> 00:04:35,774 Speaker 2: Because you believe in the growth of that company. Conversely, 80 00:04:35,785 --> 00:04:36,875 Speaker 2: there's an alternate view which 81 00:04:36,980 --> 00:04:40,839 Speaker 2: the bottom up approach, just looking at the company identifying 82 00:04:40,850 --> 00:04:44,660 Speaker 2: its growth potential, its ability to deliver alpha or earnings 83 00:04:44,670 --> 00:04:48,059 Speaker 2: for its shareholders and the sectors that is competing in. 84 00:04:48,070 --> 00:04:49,980 Speaker 2: So you look at those companies, so those things don't 85 00:04:49,988 --> 00:04:52,950 Speaker 2: change because you're buying into an equity of that company 86 00:04:52,959 --> 00:04:56,309 Speaker 2: right now, your question was what is a dividend stock? 87 00:04:56,549 --> 00:04:59,828 Speaker 2: So the typical characteristic of a dividend stock is by 88 00:04:59,839 --> 00:05:02,729 Speaker 2: and large, a more mature company, a company that has 89 00:05:02,825 --> 00:05:05,765 Speaker 2: been around for a while, owns the greater part of 90 00:05:05,774 --> 00:05:07,385 Speaker 2: the industry that they are competing in, 91 00:05:07,394 --> 00:05:07,864 Speaker 1: right? And 92 00:05:07,875 --> 00:05:10,924 Speaker 1: when you say mature, how old would this company be? Roughly, 93 00:05:10,934 --> 00:05:13,703 Speaker 2: it varies in terms of industry. So the industry like 94 00:05:13,714 --> 00:05:17,545 Speaker 2: the financial industry, typically you are talking north of 50 years, 95 00:05:17,734 --> 00:05:20,894 Speaker 2: brick and mortar company who have been around, have weather 96 00:05:20,904 --> 00:05:24,605 Speaker 2: through many crisis and market volatilities. This company tends to 97 00:05:24,613 --> 00:05:28,575 Speaker 2: be a lot more stable, a lot better govern better rent. 98 00:05:28,829 --> 00:05:32,609 Speaker 2: So these companies are considered mature, right? So typically when 99 00:05:32,619 --> 00:05:36,019 Speaker 2: these companies are already mature, they do not need to 100 00:05:36,029 --> 00:05:40,178 Speaker 2: have to reinvest every single profit back into the business 101 00:05:40,329 --> 00:05:43,890 Speaker 2: to grow. So essentially, now they have excess cash flow 102 00:05:44,200 --> 00:05:46,019 Speaker 2: and they need to be profitable. Otherwise you have no 103 00:05:46,029 --> 00:05:47,640 Speaker 2: money to pay out, right? So they need to be 104 00:05:47,649 --> 00:05:50,970 Speaker 2: profitable and they have excess cash. That's when they decide 105 00:05:50,980 --> 00:05:52,169 Speaker 2: to pay out a dividend. 106 00:05:52,178 --> 00:05:53,440 Speaker 1: Ah 107 00:05:53,488 --> 00:05:55,409 Speaker 1: ok. So that's why 108 00:05:55,535 --> 00:05:58,834 Speaker 1: the more mature or perhaps the more established the company, 109 00:05:58,924 --> 00:06:02,643 Speaker 1: the better the dividend yield is, would that be the 110 00:06:02,654 --> 00:06:03,714 Speaker 1: correct description? 111 00:06:03,725 --> 00:06:05,625 Speaker 2: Actually? Again, it depends the 112 00:06:05,635 --> 00:06:06,825 Speaker 1: company's performance as well. 113 00:06:07,355 --> 00:06:07,625 Speaker 2: The 114 00:06:07,635 --> 00:06:09,825 Speaker 2: right way to think about it is you want to 115 00:06:09,834 --> 00:06:13,565 Speaker 2: have a company that pays a consistent and a stable 116 00:06:13,575 --> 00:06:16,904 Speaker 2: dividend as opposed to a company that swings wildly in 117 00:06:16,915 --> 00:06:20,174 Speaker 2: terms of its dividend payoff because this can be for 118 00:06:20,184 --> 00:06:22,154 Speaker 2: one detrimental for long term planning. 119 00:06:22,380 --> 00:06:26,059 Speaker 2: Secondly, in terms of expectations, some companies pay very high dividends, 120 00:06:26,070 --> 00:06:28,190 Speaker 2: but you got to understand why is it paying very 121 00:06:28,200 --> 00:06:31,529 Speaker 2: high dividends? Is it because it's truly growing, it's extremely 122 00:06:31,540 --> 00:06:34,950 Speaker 2: profitable and hence paying dividends or is it just paying 123 00:06:34,959 --> 00:06:36,730 Speaker 2: dividends out of cash flow? 124 00:06:36,738 --> 00:06:37,058 Speaker 1: Ah, 125 00:06:37,070 --> 00:06:40,190 Speaker 1: understood. Ok. That's a really good caveat to have and 126 00:06:40,200 --> 00:06:42,929 Speaker 1: to keep in mind. So thank you for that. So 127 00:06:42,940 --> 00:06:45,600 Speaker 1: let me put it this way. As long as I 128 00:06:45,609 --> 00:06:48,809 Speaker 1: have money, can I just go and buy a dividend stock? 129 00:06:49,049 --> 00:06:51,260 Speaker 2: Yes, you can. As long as you have the money 130 00:06:51,269 --> 00:06:54,559 Speaker 2: to participate in these markets. Anyone can participate and go 131 00:06:54,570 --> 00:06:56,730 Speaker 2: to a brokerage. Of course, there are certain age limits 132 00:06:56,738 --> 00:06:59,839 Speaker 2: in Singapore before you can invest into our company. But 133 00:06:59,850 --> 00:07:04,140 Speaker 2: essentially you need to understand the fees and the costs within, 134 00:07:04,149 --> 00:07:06,859 Speaker 2: for example, buying into a share, there's a brokerage fee, 135 00:07:06,869 --> 00:07:10,549 Speaker 2: there's custodian fee if you're buying into a foreign share, 136 00:07:10,559 --> 00:07:13,100 Speaker 2: for example, there's withholding tax that you need to factor 137 00:07:13,109 --> 00:07:15,309 Speaker 2: into your overall returns. Fortunately, 138 00:07:15,380 --> 00:07:18,320 Speaker 2: for us, Singaporeans, we don't have reporting tax. So that's 139 00:07:18,329 --> 00:07:20,709 Speaker 2: one of the key benefits. Why foreign investors like to 140 00:07:20,720 --> 00:07:22,500 Speaker 2: buy a dividend stock in Singapore? 141 00:07:22,700 --> 00:07:26,470 Speaker 1: Understood. Ok. Now I understand why Singapore is such an 142 00:07:26,480 --> 00:07:28,920 Speaker 1: appealing place for them to go and buy dividend stocks. 143 00:07:28,929 --> 00:07:32,750 Speaker 1: So one of the biggest barriers to any new investment 144 00:07:32,760 --> 00:07:37,720 Speaker 1: product is where do we begin? So first, how do 145 00:07:37,730 --> 00:07:38,299 Speaker 1: I know which 146 00:07:38,309 --> 00:07:38,839 Speaker 1: ones to buy 147 00:07:38,899 --> 00:07:41,609 Speaker 2: when it comes to making an investment thesis? You need 148 00:07:41,619 --> 00:07:41,799 Speaker 2: to have 149 00:07:41,880 --> 00:07:45,609 Speaker 2: the right risk appetite for that particular investment vehicle that 150 00:07:45,619 --> 00:07:49,170 Speaker 2: you have chosen by and large. For the first time, 151 00:07:49,459 --> 00:07:52,880 Speaker 2: I would recommend going into an ETF or a mutual 152 00:07:52,890 --> 00:07:56,299 Speaker 2: fund because that's possibly the easiest and possibly even the 153 00:07:56,309 --> 00:07:59,029 Speaker 2: cheapest way for you to participate in the market. Most 154 00:07:59,040 --> 00:08:03,269 Speaker 2: funds has a low minimum threshold of 500 to start with. 155 00:08:03,279 --> 00:08:05,820 Speaker 2: And then you can have regular investment plan that allows 156 00:08:05,829 --> 00:08:07,779 Speaker 2: you to build on your investment and capital in the 157 00:08:07,790 --> 00:08:08,299 Speaker 2: long run. 158 00:08:08,600 --> 00:08:11,839 Speaker 2: The other benefit in a fund is that it's highly diversified. 159 00:08:12,019 --> 00:08:15,059 Speaker 2: You don't have a concentration risk into one particular company, 160 00:08:15,140 --> 00:08:20,309 Speaker 2: but to maybe access to 50 companies with very attractive dividends, 161 00:08:20,559 --> 00:08:24,220 Speaker 2: not just locally but across different sectors and even globally. 162 00:08:24,429 --> 00:08:27,458 Speaker 2: So that in itself is extremely attractive, but of course, 163 00:08:27,470 --> 00:08:29,880 Speaker 2: that comes with a management fee, right? 164 00:08:29,890 --> 00:08:30,660 Speaker 1: So talk to me about 165 00:08:30,670 --> 00:08:30,859 Speaker 1: that. 166 00:08:30,869 --> 00:08:33,179 Speaker 2: Ok, so when it comes to management fee, you will 167 00:08:33,190 --> 00:08:33,579 Speaker 2: want to learn, 168 00:08:33,672 --> 00:08:37,522 Speaker 2: look at the total expense ratio te of a company 169 00:08:37,533 --> 00:08:41,602 Speaker 2: of underlying fund. So that takes into consideration the management fee, 170 00:08:41,612 --> 00:08:45,062 Speaker 2: custodians fee and transactional fee. For example, basically it's like 171 00:08:45,072 --> 00:08:48,062 Speaker 2: a service charge, it's a service charge. Yeah. So typically 172 00:08:48,072 --> 00:08:50,643 Speaker 2: once you factor that in, that should be part and 173 00:08:50,653 --> 00:08:54,903 Speaker 2: parcel of your investment decision. Now if you have more ammunition, 174 00:08:55,023 --> 00:08:57,602 Speaker 2: higher risk profile and you want to express a view, 175 00:08:57,612 --> 00:08:58,653 Speaker 2: for example, your view 176 00:08:58,745 --> 00:09:01,026 Speaker 2: is that rates are going to stay very high. Financial 177 00:09:01,035 --> 00:09:04,444 Speaker 2: institutions will do extremely well because of a net interest margin. 178 00:09:04,535 --> 00:09:06,846 Speaker 2: You may want to participate into a bank that pays 179 00:09:06,856 --> 00:09:10,526 Speaker 2: very attractive dividend. But bear in mind you're holding a 180 00:09:10,535 --> 00:09:13,945 Speaker 2: single equity, a single name and I'm not saying it 181 00:09:13,955 --> 00:09:16,385 Speaker 2: will happen, but many things can happen when you have 182 00:09:16,395 --> 00:09:17,995 Speaker 2: such concentration. Anything 183 00:09:18,005 --> 00:09:21,574 Speaker 1: can happen. Basically, it's putting all your eggs in one 184 00:09:21,585 --> 00:09:23,726 Speaker 1: basket versus spreading it out. 185 00:09:24,000 --> 00:09:27,968 Speaker 1: Ok. So what is it that makes a good dividend 186 00:09:27,979 --> 00:09:28,359 Speaker 1: stock? 187 00:09:28,369 --> 00:09:31,209 Speaker 2: Ok, typically, and I've touched on this earlier, these companies 188 00:09:31,219 --> 00:09:34,320 Speaker 2: are mature, they have already added a lot of the 189 00:09:34,330 --> 00:09:37,549 Speaker 2: volatility which the industry that they are still participating in 190 00:09:37,559 --> 00:09:40,700 Speaker 2: have already trans. So a lot of this company have 191 00:09:40,710 --> 00:09:44,460 Speaker 2: a well-established business, very well run govern at the same 192 00:09:44,469 --> 00:09:48,858 Speaker 2: time and with very clear business models and it's identifiable who, 193 00:09:49,090 --> 00:09:51,010 Speaker 2: where most of their income streams come 194 00:09:51,020 --> 00:09:51,309 Speaker 2: from. 195 00:09:51,320 --> 00:09:53,030 Speaker 1: So it's very tried and tested, 196 00:09:53,039 --> 00:09:55,559 Speaker 2: tried and tested and also the fact that many of 197 00:09:55,570 --> 00:09:58,239 Speaker 2: the risk has already been factored in or has been experienced. 198 00:09:58,250 --> 00:10:00,380 Speaker 2: So they know how to manage some of this long 199 00:10:00,390 --> 00:10:03,270 Speaker 2: term risk. So a lot of these companies again belonging 200 00:10:03,280 --> 00:10:06,409 Speaker 2: to the blue chip space and widely recognized, not only 201 00:10:06,419 --> 00:10:08,469 Speaker 2: in the domestic market but on a global stage, 202 00:10:08,479 --> 00:10:09,130 Speaker 1: right? And 203 00:10:09,140 --> 00:10:13,590 Speaker 1: it makes me think about all the various companies that 204 00:10:13,760 --> 00:10:13,960 Speaker 1: were 205 00:10:14,210 --> 00:10:19,190 Speaker 1: mostly watched and scrutinized during COVID, a lot of aviation companies, 206 00:10:19,200 --> 00:10:23,500 Speaker 1: for example, a lot of construction companies during COVID, some 207 00:10:23,510 --> 00:10:28,950 Speaker 1: of these companies had cash infused in those situations. How 208 00:10:28,960 --> 00:10:33,039 Speaker 1: are shareholders affected them because then that cash that you 209 00:10:33,049 --> 00:10:35,919 Speaker 1: talked about, right, that extra profit that typically goes to 210 00:10:35,929 --> 00:10:39,210 Speaker 1: us as dividend payouts to investors. What happens to 211 00:10:39,330 --> 00:10:42,390 Speaker 1: that when that cash has to be used for an 212 00:10:42,400 --> 00:10:43,330 Speaker 1: emergency like 213 00:10:43,340 --> 00:10:43,659 Speaker 1: COVID? 214 00:10:43,669 --> 00:10:48,229 Speaker 2: Excellent question. Now COVID was a exceptional time, not only 215 00:10:48,239 --> 00:10:52,429 Speaker 2: for us but for any company that's operating around the world, 216 00:10:52,440 --> 00:10:57,289 Speaker 2: but more importantly, the survivability of the company really does 217 00:10:57,330 --> 00:11:00,830 Speaker 2: require the company to be able to evolve and be 218 00:11:00,840 --> 00:11:04,348 Speaker 2: able to adapt to the COVID situation. Airlines for example, 219 00:11:04,450 --> 00:11:06,569 Speaker 2: had a really tough time because no one was flying, 220 00:11:06,580 --> 00:11:10,190 Speaker 2: no one is allowed to fly their revenue stream totally 221 00:11:10,200 --> 00:11:13,000 Speaker 2: grounded to a halt. So in the absence of which 222 00:11:13,010 --> 00:11:15,130 Speaker 2: they actually focus a lot of their efforts towards the 223 00:11:15,140 --> 00:11:19,650 Speaker 2: commercial side which is transportation of goods pivoting, it was 224 00:11:19,659 --> 00:11:23,119 Speaker 2: pivoting and they managed to at least account for some 225 00:11:23,130 --> 00:11:26,669 Speaker 2: of the revenue stream. So typically in periods of stress, 226 00:11:26,679 --> 00:11:29,468 Speaker 2: like such companies will tend not to be 227 00:11:29,570 --> 00:11:32,590 Speaker 2: so generous in terms of their dividend payout because they 228 00:11:32,599 --> 00:11:34,909 Speaker 2: need to ensure that they are sufficient cash flow to 229 00:11:34,919 --> 00:11:39,719 Speaker 2: ensure the company survives during such difficult times. So obviously, 230 00:11:39,729 --> 00:11:44,489 Speaker 2: you won't see an extravagant dividend announcement. Conversely when the 231 00:11:44,500 --> 00:11:47,510 Speaker 2: markets are doing very well and the industry has picked 232 00:11:47,520 --> 00:11:51,090 Speaker 2: up on there's exceptional profits. You will see companies like 233 00:11:51,099 --> 00:11:54,549 Speaker 2: such announcing an exceptional dividend and a little bit extra 234 00:11:54,820 --> 00:11:58,640 Speaker 2: to reward shareholders, investors for being loyal to them, holding 235 00:11:58,650 --> 00:12:01,950 Speaker 2: their equities and staying with them during difficult times 236 00:12:01,960 --> 00:12:04,978 Speaker 1: when it comes to the shareholders sentiment, wouldn't that make 237 00:12:04,989 --> 00:12:06,840 Speaker 1: the company sort of beholden 238 00:12:07,289 --> 00:12:10,709 Speaker 1: to their shareholders to their investors? Because if I'm not 239 00:12:10,719 --> 00:12:14,429 Speaker 1: getting a dividend this year, what makes me think I'm 240 00:12:14,440 --> 00:12:16,869 Speaker 1: going to get it next year or in the future, 241 00:12:16,880 --> 00:12:19,880 Speaker 1: even if the company is long established and has had 242 00:12:19,890 --> 00:12:21,349 Speaker 1: those tried and tested moments. 243 00:12:21,359 --> 00:12:24,099 Speaker 2: So typically, when an investor buys into a company, there 244 00:12:24,109 --> 00:12:27,460 Speaker 2: are two reasons particularly in a dividend stock, one, they 245 00:12:27,469 --> 00:12:30,210 Speaker 2: want to buy it for the dividend yield which you articulated. 246 00:12:30,219 --> 00:12:31,750 Speaker 2: So in terms of stress, they may not 247 00:12:31,840 --> 00:12:33,619 Speaker 2: be getting a dividend. But if you look at the 248 00:12:33,630 --> 00:12:36,770 Speaker 2: historical track record of the said company with a very 249 00:12:36,780 --> 00:12:40,960 Speaker 2: stable and regular dividend payout, this does suggest that when 250 00:12:40,969 --> 00:12:45,080 Speaker 2: things normalizes the company is capable of paying a similar 251 00:12:45,090 --> 00:12:48,179 Speaker 2: or even better dividend in the future. The other thing 252 00:12:48,229 --> 00:12:51,140 Speaker 2: is that when you buy into a share in equity, 253 00:12:51,150 --> 00:12:55,169 Speaker 2: you're also looking for capital appreciation. What's capital appreciation price movement? 254 00:12:55,179 --> 00:12:56,119 Speaker 2: Ie by low 255 00:12:56,390 --> 00:12:58,020 Speaker 2: sell high, that's the best way to make money in 256 00:12:58,030 --> 00:13:01,369 Speaker 2: the market, actually the best way, the best way. So 257 00:13:01,469 --> 00:13:04,890 Speaker 2: in terms of stress, again, company stock price will come 258 00:13:04,900 --> 00:13:08,919 Speaker 2: down because of the uncertainties, market sentiments are poor. People 259 00:13:08,929 --> 00:13:11,319 Speaker 2: tend to sell down the share because maybe they are 260 00:13:11,330 --> 00:13:14,809 Speaker 2: not so confident about the company's profitability during that period 261 00:13:14,820 --> 00:13:18,039 Speaker 2: or maybe in the future. Now, conversely, investors with the 262 00:13:18,049 --> 00:13:20,809 Speaker 2: rigged appetite will actually see this is an opportunity 263 00:13:21,070 --> 00:13:24,130 Speaker 2: I really should get myself into this share or this 264 00:13:24,140 --> 00:13:26,869 Speaker 2: name because I think in the long term, not only 265 00:13:26,880 --> 00:13:30,968 Speaker 2: will this company survive this current episode, it will thrive 266 00:13:30,979 --> 00:13:33,750 Speaker 2: and do a lot better post episode and I will 267 00:13:33,760 --> 00:13:36,750 Speaker 2: be in the money. So capital decision by low sell high. 268 00:13:36,760 --> 00:13:36,919 Speaker 2: So 269 00:13:36,929 --> 00:13:40,609 Speaker 1: essentially the history of the company's performance and the opportunity 270 00:13:40,619 --> 00:13:43,589 Speaker 1: for capital appreciation. These are the things that dividend investors 271 00:13:43,599 --> 00:13:46,119 Speaker 1: would like to look out for. So when I invest 272 00:13:46,130 --> 00:13:48,039 Speaker 1: in a dividend stock, I would 273 00:13:48,151 --> 00:13:53,221 Speaker 1: expect some returns. So when is payday for dividend investors 274 00:13:53,231 --> 00:13:55,190 Speaker 1: and how are they paid out? Ok. 275 00:13:55,200 --> 00:13:58,210 Speaker 2: It varies again from company to company, industry to industry 276 00:13:58,221 --> 00:14:01,120 Speaker 2: as well. So dividends can come in the form of quarterly, 277 00:14:01,130 --> 00:14:04,481 Speaker 2: half annually or even annually. So it really depends on 278 00:14:04,491 --> 00:14:07,559 Speaker 2: the board of directors within the said company and their 279 00:14:07,570 --> 00:14:11,950 Speaker 2: normal practices. So typically we see companies actually pay out 280 00:14:11,960 --> 00:14:14,911 Speaker 2: on an annual basis and this money paid out in 281 00:14:14,921 --> 00:14:15,140 Speaker 2: various 282 00:14:15,231 --> 00:14:17,892 Speaker 2: form, it can be a in the form of cash. 283 00:14:17,901 --> 00:14:20,861 Speaker 2: So it's a direct credit into your account. Conversely, you 284 00:14:20,872 --> 00:14:24,262 Speaker 2: can be paid via more shares, ok? And if you're 285 00:14:24,271 --> 00:14:27,552 Speaker 2: paid more shares, you can either a sell those shares 286 00:14:27,562 --> 00:14:31,291 Speaker 2: for money or for the long term investor reinvest it. 287 00:14:31,302 --> 00:14:33,892 Speaker 2: So the best way if you have a long term horizon, 288 00:14:33,901 --> 00:14:37,122 Speaker 2: reinvest the money because the moment you reinvest the money, 289 00:14:37,132 --> 00:14:40,331 Speaker 2: you actually invoke the eighth wonder of the world, the 290 00:14:40,341 --> 00:14:42,101 Speaker 1: eighth wonder of the world. 291 00:14:42,312 --> 00:14:43,333 Speaker 1: Tell me more. 292 00:14:43,382 --> 00:14:45,973 Speaker 2: The eighth wonder of the world is a power of compounding. 293 00:14:45,982 --> 00:14:49,132 Speaker 2: So when you reinvest your money, you reinvest the share 294 00:14:49,143 --> 00:14:52,122 Speaker 2: into the company, you create two streams of income, the 295 00:14:52,132 --> 00:14:55,372 Speaker 2: natural income, which is the dividend payout. But because of 296 00:14:55,382 --> 00:14:58,372 Speaker 2: the fact that you are reinvesting it, you're earning interest 297 00:14:58,382 --> 00:15:01,093 Speaker 2: upon the interest or dividend upon dividend. 298 00:15:01,103 --> 00:15:04,622 Speaker 1: Ok? So it's really a good strategy to have it 299 00:15:04,632 --> 00:15:08,232 Speaker 1: stacked on to each other so that you're just maximizing 300 00:15:08,242 --> 00:15:09,293 Speaker 1: really your return 301 00:15:09,544 --> 00:15:10,114 Speaker 1: optimizing 302 00:15:10,124 --> 00:15:10,494 Speaker 2: for sure. 303 00:15:10,504 --> 00:15:13,854 Speaker 1: Yeah. Yeah. Ok. So can a company decide to cut 304 00:15:13,864 --> 00:15:18,434 Speaker 1: dividends and in some cases not even pay out at all? 305 00:15:18,443 --> 00:15:21,554 Speaker 2: Yes, a company can do that. It's within their jurisdiction. 306 00:15:21,864 --> 00:15:25,054 Speaker 2: But typically when a company chooses to dial down or 307 00:15:25,064 --> 00:15:28,734 Speaker 2: to cut dividend, it's usually a pretty bad sign that 308 00:15:28,744 --> 00:15:32,533 Speaker 2: the company isn't performing particularly as well. There are certain 309 00:15:32,544 --> 00:15:36,374 Speaker 2: challenges that they are gathering sufficient ammunition to meet 310 00:15:36,664 --> 00:15:40,174 Speaker 2: and these are typically not ideal situation for a company 311 00:15:40,184 --> 00:15:42,455 Speaker 2: to be in. So the news that goes out into 312 00:15:42,465 --> 00:15:44,844 Speaker 2: the industry or to the markets tend to be pretty 313 00:15:44,854 --> 00:15:48,984 Speaker 2: negative when a company does cut or stop dividends. That 314 00:15:48,994 --> 00:15:50,895 Speaker 2: is also one of the reasons why a lot of 315 00:15:50,905 --> 00:15:54,114 Speaker 2: these dividends are more dud in the onset so that 316 00:15:54,125 --> 00:15:55,414 Speaker 2: it doesn't send out the wrong signal, 317 00:15:55,424 --> 00:15:58,335 Speaker 1: ah, understood. So there's a lot of care that goes 318 00:15:58,344 --> 00:16:01,994 Speaker 1: into sort of looking after what comes out of the company, 319 00:16:02,005 --> 00:16:03,455 Speaker 1: be it dividends, be 320 00:16:03,556 --> 00:16:07,236 Speaker 1: news, be it crises or even good news. There has 321 00:16:07,245 --> 00:16:11,776 Speaker 1: to be a measure to everything. How often does such 322 00:16:11,786 --> 00:16:17,846 Speaker 1: crises happen to established companies to the point where they decide? Ok, 323 00:16:17,856 --> 00:16:19,945 Speaker 1: we need to cut the dividend and not pay you 324 00:16:19,955 --> 00:16:21,575 Speaker 1: at all. How often does this happen 325 00:16:21,585 --> 00:16:26,406 Speaker 2: for very established businesses? Surprisingly, it's not very often. In fact, 326 00:16:26,416 --> 00:16:30,546 Speaker 2: most of this company usually have some layer of additional 327 00:16:30,875 --> 00:16:31,656 Speaker 2: fats 328 00:16:32,469 --> 00:16:35,880 Speaker 2: or cash reserve that still there to pay out as 329 00:16:35,890 --> 00:16:36,820 Speaker 2: form of dividend. 330 00:16:37,010 --> 00:16:40,700 Speaker 1: So enough of the doomsday talk, tell us what's the 331 00:16:40,710 --> 00:16:44,210 Speaker 1: biggest benefit of owning a dividend 332 00:16:44,219 --> 00:16:44,919 Speaker 1: stock. 333 00:16:44,929 --> 00:16:46,599 Speaker 2: There are many benefits when it comes to 334 00:16:47,210 --> 00:16:49,849 Speaker 2: holding a dividend stock, but I do want about a 335 00:16:49,859 --> 00:16:52,710 Speaker 2: pure dividend portfolio, but I might come to that later. 336 00:16:52,940 --> 00:16:55,289 Speaker 2: The main reason why you buy into a dividend stock 337 00:16:55,299 --> 00:16:58,530 Speaker 2: is to buy the stability and the consistency of the 338 00:16:58,539 --> 00:17:01,929 Speaker 2: underlying company, you will experience a lot less volatility in 339 00:17:01,940 --> 00:17:05,718 Speaker 2: terms of price movements. So typically there is a huge plus, 340 00:17:05,729 --> 00:17:10,300 Speaker 2: it is also providing a regular income for investors. Maybe 341 00:17:10,310 --> 00:17:13,949 Speaker 2: people who are approaching retirement when you stop being able 342 00:17:13,959 --> 00:17:13,989 Speaker 2: to 343 00:17:14,083 --> 00:17:17,953 Speaker 2: exchange human capital for a salary and income, passive income 344 00:17:17,963 --> 00:17:21,953 Speaker 2: becomes incredibly important. Dividend stock can play a very important 345 00:17:21,963 --> 00:17:24,863 Speaker 2: role in terms of playing that passive income role alongside 346 00:17:24,874 --> 00:17:28,734 Speaker 2: maybe fixed income coupon payments and rental, so and so forth. 347 00:17:28,744 --> 00:17:32,063 Speaker 2: So dividend payout can also enhance the amount of money 348 00:17:32,073 --> 00:17:34,943 Speaker 2: you have to spend on a monthly basis, extra pocket money, 349 00:17:34,953 --> 00:17:37,582 Speaker 2: extra pocket money per se. So if you think about 350 00:17:37,593 --> 00:17:40,062 Speaker 2: it as the world gets older and Singapore is getting 351 00:17:40,073 --> 00:17:40,822 Speaker 2: very old, 352 00:17:40,959 --> 00:17:44,530 Speaker 2: yes, that natural demand for companies with the ability to 353 00:17:44,540 --> 00:17:46,859 Speaker 2: pay out income will rise to prominence. 354 00:17:46,869 --> 00:17:49,609 Speaker 1: And I'll tell you what something else that will rise 355 00:17:49,619 --> 00:17:51,699 Speaker 1: in the midst of all this, the pressure on these 356 00:17:51,709 --> 00:17:56,579 Speaker 1: companies to stay healthy, to stay robust, maintain their ability 357 00:17:56,589 --> 00:17:57,760 Speaker 1: to pay out those 358 00:17:57,770 --> 00:17:58,270 Speaker 1: dividends, 359 00:17:58,280 --> 00:18:02,250 Speaker 2: especially when times like this, when artificial intelligence is already 360 00:18:02,260 --> 00:18:04,619 Speaker 2: disrupting a lot of these major industries. I 361 00:18:04,630 --> 00:18:04,938 Speaker 1: mean, the 362 00:18:04,949 --> 00:18:07,540 Speaker 1: rapid pace of it all, I think it's what's scaring 363 00:18:08,364 --> 00:18:10,853 Speaker 1: because we fear that we may not be ready for it. 364 00:18:10,864 --> 00:18:15,083 Speaker 2: Most companies have invested significantly in that area. But you 365 00:18:15,094 --> 00:18:18,314 Speaker 2: are right because the pace of this evolution is really fast, 366 00:18:18,344 --> 00:18:20,754 Speaker 2: many companies will find that they are unable to keep 367 00:18:20,765 --> 00:18:20,935 Speaker 2: up. 368 00:18:20,944 --> 00:18:23,155 Speaker 1: You talked about some of the upsides of having a 369 00:18:23,165 --> 00:18:26,494 Speaker 1: dividend stock. What are the caveats though? What are the 370 00:18:26,505 --> 00:18:28,885 Speaker 1: downsides that we need to take note of? 371 00:18:28,895 --> 00:18:31,764 Speaker 2: So when you think about investing, there's always a certain 372 00:18:31,775 --> 00:18:34,574 Speaker 2: amount of risk because ultimately buying into equity, 373 00:18:34,839 --> 00:18:38,719 Speaker 2: you are at possibly the bottom of the repayment rack. 374 00:18:38,729 --> 00:18:43,349 Speaker 2: For example, if company becomes insolvent, said company, the creditors 375 00:18:43,359 --> 00:18:46,579 Speaker 2: of the company, the bond holders will get paid first, ok? 376 00:18:46,589 --> 00:18:49,438 Speaker 2: If the debt structure is not too complex, maybe there 377 00:18:49,449 --> 00:18:52,780 Speaker 2: will be some left for equity shareholder. But typically in 378 00:18:52,790 --> 00:18:56,380 Speaker 2: this situation, a shareholder may not be getting very much back. 379 00:18:56,390 --> 00:18:59,989 Speaker 2: Should the company become insolvent? Similarly, when you think about 380 00:19:00,000 --> 00:19:02,680 Speaker 2: investing and I briefly touch about this point, if you're 381 00:19:02,689 --> 00:19:03,250 Speaker 2: investing 382 00:19:03,353 --> 00:19:06,942 Speaker 2: wholly into a dividend portfolio, buying all companies that pays 383 00:19:06,953 --> 00:19:08,483 Speaker 2: a dividend, you tend to have a bit of a 384 00:19:08,493 --> 00:19:12,652 Speaker 2: concentration risk to this point. The concentration risk is typified 385 00:19:12,662 --> 00:19:17,012 Speaker 2: by companies that seem to operate in similar sectors. Ok. 386 00:19:17,022 --> 00:19:21,493 Speaker 2: So typically companies found in the utility space, real estates, financials, 387 00:19:21,503 --> 00:19:24,593 Speaker 2: these are companies that are very established, but it also 388 00:19:24,603 --> 00:19:27,753 Speaker 2: means that you have a lot of your exposure into 389 00:19:27,762 --> 00:19:31,713 Speaker 2: a very narrow sectorial allocation. OK. So if you had 390 00:19:31,885 --> 00:19:34,776 Speaker 2: a portfolio and in the past two years, you would 391 00:19:34,786 --> 00:19:37,365 Speaker 2: have lost out because if you think about it, the 392 00:19:37,375 --> 00:19:40,526 Speaker 2: magnificent seven that A I leaders of the world were 393 00:19:40,536 --> 00:19:43,416 Speaker 2: the top performers. You would have missed out in that 394 00:19:43,426 --> 00:19:48,345 Speaker 2: gain by just purely focusing on a dividend defensive only 395 00:19:48,355 --> 00:19:48,845 Speaker 2: strategy 396 00:19:48,855 --> 00:19:52,765 Speaker 1: understood. So diversification still the best advice out there for 397 00:19:52,776 --> 00:19:57,436 Speaker 1: investors extremely so able, ultimately, who should have a dividend 398 00:19:57,446 --> 00:19:59,845 Speaker 1: stock in their portfolio? Everyone. 399 00:20:01,280 --> 00:20:03,900 Speaker 1: That's a great sell. I have to say Abel, it's 400 00:20:03,910 --> 00:20:05,790 Speaker 1: been a pleasure. Thank you for being on the show 401 00:20:05,800 --> 00:20:09,209 Speaker 1: and helping us understand the basics, the building blocks of 402 00:20:09,219 --> 00:20:12,489 Speaker 1: dividend stocks and knowing the right questions really to ask 403 00:20:12,500 --> 00:20:14,989 Speaker 1: ourselves before we decide to plunge into the world of 404 00:20:15,000 --> 00:20:18,589 Speaker 1: dividend stocks. And I'm very sure that your advice will 405 00:20:18,599 --> 00:20:20,000 Speaker 1: come in handy. So thank you so 406 00:20:20,010 --> 00:20:20,319 Speaker 1: much. 407 00:20:20,380 --> 00:20:21,439 Speaker 2: The pleasure is all mine. 408 00:20:23,430 --> 00:20:25,660 Speaker 1: All right. So before we let you go, we have 409 00:20:25,670 --> 00:20:28,849 Speaker 1: a segment called questions from a hat. Just pick one 410 00:20:28,859 --> 00:20:31,729 Speaker 1: hand it over to me and I will read it out. 411 00:20:33,819 --> 00:20:37,589 Speaker 1: So, Abel, if you could have a meal with any 412 00:20:37,599 --> 00:20:41,680 Speaker 1: public figure dead or alive, who would it be and 413 00:20:41,689 --> 00:20:42,260 Speaker 1: why? 414 00:20:42,400 --> 00:20:45,478 Speaker 2: Oh, ok. Wow, that's simple. The founder of our country. 415 00:20:45,489 --> 00:20:49,280 Speaker 2: Mr Lee Kuan Yew. I have tremendous respect for this individual, 416 00:20:49,339 --> 00:20:53,060 Speaker 2: how he has turned a third world city into a 417 00:20:53,069 --> 00:20:54,119 Speaker 2: first class nation. 418 00:20:54,439 --> 00:20:57,040 Speaker 2: There's a lot to be thankful about today. The learnings 419 00:20:57,050 --> 00:20:59,698 Speaker 2: that he said the trials and tribulations that he has 420 00:20:59,709 --> 00:21:02,689 Speaker 2: to go through during the difficult period. I know many 421 00:21:02,699 --> 00:21:06,280 Speaker 2: people also disagree with the way he got about doing things. 422 00:21:06,290 --> 00:21:08,920 Speaker 2: But you can't please everybody, you can't please everybody. There's 423 00:21:08,930 --> 00:21:12,280 Speaker 2: no right or wrong because everyone was still feeling around 424 00:21:12,290 --> 00:21:14,979 Speaker 2: and trying to get things right. So I have tremendous 425 00:21:14,989 --> 00:21:17,660 Speaker 2: respect for Mr Lee. And then he has been a 426 00:21:17,670 --> 00:21:20,500 Speaker 2: role model in terms of how I look at things 427 00:21:20,510 --> 00:21:21,140 Speaker 2: and how I 428 00:21:21,599 --> 00:21:22,180 Speaker 2: deal with life. 429 00:21:22,189 --> 00:21:22,410 Speaker 1: He 430 00:21:22,420 --> 00:21:25,429 Speaker 1: was a formidable figure and you could even argue still 431 00:21:25,439 --> 00:21:29,569 Speaker 1: is a formidable figure today. Now, listener, if you have 432 00:21:29,579 --> 00:21:33,560 Speaker 1: been thinking about dividend investing, I hope this episode has 433 00:21:33,569 --> 00:21:37,079 Speaker 1: been a comprehensive yet very easy to follow, guide to 434 00:21:37,089 --> 00:21:41,680 Speaker 1: understanding the basics. Got a question or comment about this episode. Hey, 435 00:21:41,689 --> 00:21:44,718 Speaker 1: send us a message. Money Talks is streaming on 436 00:21:44,819 --> 00:21:49,550 Speaker 1: Apple podcasts, Spotify and youtube music. Rate us please. If 437 00:21:49,560 --> 00:21:52,979 Speaker 1: you are enjoying the podcast credits to the Money Talks team. 438 00:21:52,989 --> 00:21:57,430 Speaker 1: Of course, Christina Robert Tiffany, Ang Jaini, Johari, Joan Chan 439 00:21:57,439 --> 00:22:00,800 Speaker 1: and Tsai Yu. I'm Andrea Heng. Thank you for listening 440 00:22:00,810 --> 00:22:01,680 Speaker 1: to Money Talks.