05.2022 Life Guide
Choose the right high yield stocks to make it easy for you to get year-end profits
Investment consulting research department of Oriental Petrochemical (Taiwan) / Xie Yifan
The inflation storm is sweeping the world, and the low interest rate environment also makes deposits less and less valuable. Many people turn to investing in financial products. Among them, "stock" is undoubtedly one of the hottest options. In addition to earning stock price spread, they also have the opportunity to share dividends. This article will explain how to select the appropriate "high yield" stock deposit targets to accumulate wealth for yourself.
What is the yield rate?
Take the cash dividend that can be obtained from the stock every year as the deposit interest, and calculate the rate of return on investment in percentage, that is, the "yield" of the stock. The calculation formula is: dividend per share (part of cash dividend) / share price per share (yuan).
Risk of high cash yield stocks
Generally speaking, only when the yield rate is stable above 5% can it be called "high cash yield stock". However, don't invest all your money just because the interest rate of high yield stocks is higher than that of bank deposits. After all, the essence of stocks is marketable securities, and the investment risk is relatively high. Unlike bank deposits, they have the function of protecting the principal.
The following are the risks and investment precautions of high cash yield stocks:
Companies with high cash yield are not necessarily good companies: cash dividends are distributed to investors holding stocks after deducting debts and future budgets from the annual surplus. If the cash dividend is high, it may mean that there is no breakthrough in the company's future development, so there is no need to plan capital expenditure. In other words, looking at the stock selection of high cash dividend alone, it may mistakenly select companies with no development prospects.
Don't earn dividends and lose the price difference: after investing in stocks with high cash yield, the principal loss may be greater than the cash dividend, or the interest cannot be filled smoothly after ex dividend, resulting in losses.
Observation method of yield: observe the long-term trend and whether the allotment status for at least three to five years is stable, including the company's profit, allotment rate, cash dividend ratio, etc.
Understand the status of capital increase and interest allocation: cash capital increase means that the company raises funds from the public by issuing shares after the initial public offering. When investing, we should pay attention to whether the company pays cash dividends by means of cash capital increase. If it is suspected that "ask investors for money and send dividends to investors", we can observe whether the dividend paid by the company is greater than the profit and whether the cash flow of the company is positive.
Consideration of Taxation: take the dividend taxation into account the cost, so as to grasp the real profit and loss. The new tax system for dividend income is as follows. Investors can choose one to declare.
[scheme 1] consolidated calculation of all income: dividend income is taxed into the total comprehensive income, and the deductible tax is calculated at 8.5% of the dividend amount, which is limited to NTD 80000 for each reporting account.
[scheme 2] single tax rate (28%) is calculated separately: the tax payable of dividend income is calculated separately according to the tax rate of 28%, and then the taxpayers report and pay it together.
Who is suitable for investing in high yield stocks?
Retirees: the purpose of investment is to obtain stable cash flow and pay living expenses.
Busy people: since there is little spare time to contact the stock market information, the nature of this type of stock is stable and there is no need to keep an eye on the market all the time.
Conservative investors: those with weak psychological anti risk ability are recommended to choose this type of stock to accumulate long-term and stable assets.
How to choose high yield stocks?
Take Asia Cement Corporation (stock code 1102) as an example. In the past ten years, the interest distribution has been stable and the interest has been paid successfully. In the past three years, the yield has been higher than 5%. During this period, the stock price has also increased, which represents the illusion of high yield not caused by the decline of stock price. In addition, EPS has been positive in the past ten years, with stable profits, positive net worth per share and positive free cash flow in the past five years.
Assuming that NTD100000 is invested on January 1 every year, calculate the investment return rate after 10 years (included in stock dividend).
Total cash dividends in 10 years: ntd394409
Book value of shares held to the end of the period: 31000 (shares) x44 3 (NTD) = 1373303 (NTD) (cumulative total number of shares x2021 / 12 / 30 closing price)
Input cost: 100000 (NTD) x10 (year) = 1000000 (NTD)
10-year return on Investment: {(ntd394409 + ntd1373303) / ntd1000000-1} = 76.8%
On the other hand, if NTD100000 is deposited in the bank on January 1 every year, take the one-year fixed deposit interest rate of Far Eastern group bank as an example to calculate the return on investment after 10 years.
The final value of 10-year deposits is ntd1048360
Input cost: 100000 (NTD) x10 (year) = 1000000 (NTD)
10-year return on Investment: (ntd1048360 ntd1000000) / ntd1000000 = 4.8%
To sum up, compared with far eastern international bank deposit, the former's rate of return (76.8%) is obviously higher than the latter (4.8%).
conclusion
The current risk-free interest rate is no longer sufficient to cope with the environment of high inflation. With the extension of time, the value of cash or fixed deposit will continue to decline. Therefore, investing in high yield stocks is a good investment strategy. Of course, high returns also hide high risks. When choosing investment targets, you need to pay more attention in order to successfully raise your salary.
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What is the yield rate?
Take the cash dividend that can be obtained from the stock every year as the deposit interest, and calculate the rate of return on investment in percentage, that is, the "yield" of the stock. The calculation formula is: dividend per share (part of cash dividend) / share price per share (yuan).
Risk of high cash yield stocks
Generally speaking, only when the yield rate is stable above 5% can it be called "high cash yield stock". However, don't invest all your money just because the interest rate of high yield stocks is higher than that of bank deposits. After all, the essence of stocks is marketable securities, and the investment risk is relatively high. Unlike bank deposits, they have the function of protecting the principal.
The following are the risks and investment precautions of high cash yield stocks:
Companies with high cash yield are not necessarily good companies: cash dividends are distributed to investors holding stocks after deducting debts and future budgets from the annual surplus. If the cash dividend is high, it may mean that there is no breakthrough in the company's future development, so there is no need to plan capital expenditure. In other words, looking at the stock selection of high cash dividend alone, it may mistakenly select companies with no development prospects.
Don't earn dividends and lose the price difference: after investing in stocks with high cash yield, the principal loss may be greater than the cash dividend, or the interest cannot be filled smoothly after ex dividend, resulting in losses.
Observation method of yield: observe the long-term trend and whether the allotment status for at least three to five years is stable, including the company's profit, allotment rate, cash dividend ratio, etc.
Understand the status of capital increase and interest allocation: cash capital increase means that the company raises funds from the public by issuing shares after the initial public offering. When investing, we should pay attention to whether the company pays cash dividends by means of cash capital increase. If it is suspected that "ask investors for money and send dividends to investors", we can observe whether the dividend paid by the company is greater than the profit and whether the cash flow of the company is positive.
Consideration of Taxation: take the dividend taxation into account the cost, so as to grasp the real profit and loss. The new tax system for dividend income is as follows. Investors can choose one to declare.
[scheme 1] consolidated calculation of all income: dividend income is taxed into the total comprehensive income, and the deductible tax is calculated at 8.5% of the dividend amount, which is limited to NTD 80000 for each reporting account.
[scheme 2] single tax rate (28%) is calculated separately: the tax payable of dividend income is calculated separately according to the tax rate of 28%, and then the taxpayers report and pay it together.
Who is suitable for investing in high yield stocks?
Retirees: the purpose of investment is to obtain stable cash flow and pay living expenses.
Busy people: since there is little spare time to contact the stock market information, the nature of this type of stock is stable and there is no need to keep an eye on the market all the time.
Conservative investors: those with weak psychological anti risk ability are recommended to choose this type of stock to accumulate long-term and stable assets.
How to choose high yield stocks?
Take Asia Cement Corporation (stock code 1102) as an example. In the past ten years, the interest distribution has been stable and the interest has been paid successfully. In the past three years, the yield has been higher than 5%. During this period, the stock price has also increased, which represents the illusion of high yield not caused by the decline of stock price. In addition, EPS has been positive in the past ten years, with stable profits, positive net worth per share and positive free cash flow in the past five years.
Assuming that NTD100000 is invested on January 1 every year, calculate the investment return rate after 10 years (included in stock dividend).
Total cash dividends in 10 years: ntd394409
Book value of shares held to the end of the period: 31000 (shares) x44 3 (NTD) = 1373303 (NTD) (cumulative total number of shares x2021 / 12 / 30 closing price)
Input cost: 100000 (NTD) x10 (year) = 1000000 (NTD)
10-year return on Investment: {(ntd394409 + ntd1373303) / ntd1000000-1} = 76.8%
On the other hand, if NTD100000 is deposited in the bank on January 1 every year, take the one-year fixed deposit interest rate of Far Eastern group bank as an example to calculate the return on investment after 10 years.
The final value of 10-year deposits is ntd1048360
Input cost: 100000 (NTD) x10 (year) = 1000000 (NTD)
10-year return on Investment: (ntd1048360 ntd1000000) / ntd1000000 = 4.8%
To sum up, compared with far eastern international bank deposit, the former's rate of return (76.8%) is obviously higher than the latter (4.8%).
conclusion
The current risk-free interest rate is no longer sufficient to cope with the environment of high inflation. With the extension of time, the value of cash or fixed deposit will continue to decline. Therefore, investing in high yield stocks is a good investment strategy. Of course, high returns also hide high risks. When choosing investment targets, you need to pay more attention in order to successfully raise your salary.
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