Asked on 21 Mar 2019
Let's say i have 1k to invest monthly, n market is at all time high, do i:
continue investing monthly (dollar cost average, but bought at overvalued price)
prepare warchest n only buy when it drops (but lose out all the dividends)
Hey Kel Vin,
If my objective is really long term dividends, I would simply do Dollar cost averaging to ensure i vest in the market.
That being said, i would maybe carve out $200/month to cater for warchest during crisis.
Hey there! For me, I add on to the stock when the P/B is at historical low (inversely, dividend yield will be at historical high). This is of course if I see the business still having a long runway ahead. In the case of REITs, different REITs have different P/B patterns, like healthcare will most of the time be trading at a premium. Follow the valuation of the business, not the share price!
Hi Kel Vin,
doenst matter whether you are growth or dividend investor, it is very important to only invest in good and undervalue companies.
if you invest in a good company at an overvalue price, it is just a good company, but bad investment.
personally, for dividends i focus on dividend yield. basically the dividend per share divide by share price. how much am i getting back for my investment. and i would like to have 7%. if not, i will skip/wait for other opportunities.
If I am already invested in the stock, I would just wait for the price to at least drop back to my average purchase price before investing more, or for the dividend yield to be nearer its 3 or 5 year historic high (meaning the price has dropped recently)
If I am not invested, I would initiate a position, sizing it appropriately, but hold on to a warchest in order to add positions later if the price drops.
Due to the brokerage cost (if we're talking about the Singapore market), $1000/mth isn't really going to cut it. Your transactional costs would be around 2.5% of your purchase value. I prefer to buy in with a decent contract value.
Both strategies will be valid only if I am certain that this is the stock that I would like to invest in (i.e, done my homework)
Hey! For dividend wise. I go for REITS usually.
So for REITS, i will go for high quality ones. If you noticed, it is very difficult to buy high quality REITS at a P/B ratio of <1.
My target is P/B ratio ranging from 1 - 1.5
So if the P/B is higher than 1.5, i would keep the 1k in cash and deploy only when the P/B ratio is less than 1.5.
So far i only like 2 REITS.
Its been 9 months since your question, and the US market had once again rebounded from its end Dec crash to register even record highs, even as trade war tensions have not been tempered down. Meantime, dividend kings, aristocrats keep increasing their dividend payout
So i guess DCA would be good for you, if you have no time nor effort to monitor and deploy the war chest
When you invest for dividends, you should focus on the dividend yield you are reaching. Whether the market is high or not, it does not really matter. Focus on the yield and the sustainability of it.
Check for the payout ratio, dividend per share trend and whether the company has huge amount of debt.
Let me know if you need further help! Happy to help!
Buy only when valuations are reasonable or cheap.
If the dividend stock that I'm eyeing is trading near its historical high dividend yield, or if it's trading near its historical low price to book ratio or price to earning ratio, assuming that my investment thesis in the company remains the same, dividend payout still sustainable, no structural change in the industry, then I'll buy/add on.
If not I will continue to build warchest. Stock market is always around, there will always be other opportunities.