In the previous article, I mentioned three conditions on how to choose a high-dividend company
1. Enterprises with performance growth for the past 5 consecutive years, or no recession;
2. Dividends have been distributed continuously for the past 5 consecutive years, and the law of dividend ratio can be found
3. Companies with dividends of more than 5% in the most recent year (dividend per share/share price)
On this basis, a friend asked if the company’s performance declined after holding it, should it continue to be retained? Or cut the meat and sell it. First, I will think about two points.
1. Is the recession the cause of the overall market recession, or is it a corporate recession?
2. Is this a short-term behavior, or is it a continuous and irreversible decline?
If the industry is on the rise, and the company’s performance continues to decline for more than 2 quarters, but there is no obvious reason (such as investing in new factories, expanding production capacity, acquiring companies), I will think that there is a problem with the company’s operations. Choose to sell at the right time; if the scale of the industry is stable, and only the company has a recession, it may be the possibility of a decline in market share. This is especially common in industries without absolute leaders, such as catering companies. For example, the performance decline of Haidilao is a typical case. If this happens, be careful to leave.
If the overall industry declines and the performance of non-single companies declines, I am more concerned about whether this is a short-term phenomenon or a long-term behavior? Simply put, it is a short-term phenomenon that is hopeful to see the end. For example, the epidemic will eventually pass, and the logistics volume will always return to the previous level, and the delivery will not be stopped. For short-term behavior, there is no need to worry at all, and you can even increase your positions against the trend.
Long-term recession is generally more likely to occur in high-tech industries, and suddenly an industry disappears. However, this type of company generally has a relatively low dividend ratio and is not the target of our investment; there is also a long-term recession mainly in the recession of commodity companies, such as coal, cement, and petroleum industries. Although various policies will intervene, it is possible that the proportion will become lower and lower in the next few decades, but the possibility of completely disappearing is still very small.
In this case, it is right to invest in the absolute industry leader. Because of the high market share, even if there is a decline in performance, small companies will eventually be allowed to appear in advance. Leading companies with enough cash on hand can further increase their market share and increase the width of their moats by acquiring small companies.
In the face of a bad environment, companies whose performance may decline can use the expected dividend rate to push the stock price back and forth. This calculation method is suitable for companies with stable dividend distribution rates, but not for companies with high or low dividends.
Take Conch Cement as an example, from 2014 to 2021, the dividend ratio will remain stable at around 31% (there are two years of excess distribution), so when calculating the expected dividend, I will first pay the lower 30% dividend. estimate.
After calculating the 30% dividend distribution ratio, just calculate the estimated profit for the next year. I usually make estimates based on the net profit margin given in the financial report. For example, the net profit in the first quarter of 2022 was 4.925 billion, a decrease of 15.21% month-on-month. Then my net profit forecast for the whole year will be based on this basis.
The yellow mark is calculated at -15% for the whole year, and the possible corresponding dividend distribution is 1.601; if it is calculated as a 5% dividend, it corresponds to the range of 32 yuan. $32 would be the anchor point for my investment. According to the current dividend of 2.38 yuan, the entry price of 32 yuan is about 7.43% of the dividend ratio. This corresponding figure will be updated as the quarterly financial report data comes out.
Sometimes the most common problem with depositing shares is worrying about fluctuations in the accounts. With an anchored price in mind, the more you encounter a drop, not only will you not worry, but you will even look forward to the position of adding positions. Finally, I wish you all the little experts who save shares, and save your shares to the freedom of wealth!
#Save stock# # #High dividend yield investment# $Conch Cement (SH600585)$
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