Using Price Earning ratio, Dividend Yield as means to select stock

Three ratios are often used to determine stock valuation, namely Price Earning ratio (PE), Dividend Yield, and Price-to-Book ratio (P/B).

Back in 2013, I wrote a blog piece covering this subject matter (dated 16 October 2013).

The following table was sourced from SGX. 30 Stocks are from the Straits Times Index (STI).

Name P/E P/B Dvd Ind Yld %
Keppel Corporation 7.4 0.9 6.1
Hongkong Land Holdings 7.6 0.5 2.9
Yangzijiang Shipbuilding (Holdings) 7.7 0.8 5.0
DBS Group Holdings 9.2 1.0 3.7
United Overseas Bank 9.6 1.0 3.7
Oversea-Chinese Banking Corporation 9.9 1.1 4.0
Global Logistic Properties 10.2 0.8 3.1
City Developments 10.5 0.9 0.9
Sembcorp Industries 10.9 0.9 3.8
UOL Group 11.4 0.6 2.6
CapitaLand 11.8 0.8 2.9
CapitaLand Mall Trust 13.0 1.2 5.0
Wilmar International 14.0 1.0 2.6
Hutchison Port Holdings Trust 15.6 0.8 10.3
CapitaLand Comm Trust 15.9 0.9 5.7
Singapore Press Holdings 16.1 1.0 4.1
Jardine Cycle & Carriage 16.2 2.0 2.6
Ascendas REIT 17.4 1.2 6.1
StarHub 17.4 24.3 5.1
Singapore Telecommunications 17.7 2.7 4.1
ComfortDelGro Corporation 20.5 2.7 3.1
Singapore Exchange 20.7 4.8 3.0
SATS 21.6 3.2 3.4
Singapore Airlines 22.0 1.8 4.0
Singapore Technologies Engineering 22.6 9.1 4.0
Thai Beverage Public Company 23.3 5.3 2.4
SIA Engineering Company 24.1 2.9 3.7
Golden Agri-Resources 54.8 0.9 1.4
Genting Singapore PLC 402.5 1.3 1.9
Sembcorp Marine N/A 1.3 3.9
Average 29.7 2.6 3.8
Source: SGX, Bloomberg & SGX StockFacts (data as of 20 July 2016)

The table is sorted by Price Earning ratio first. Price-to Book ratio is added for additional information of the stock.

The Price Earning ratio of STI is currently at 12.43 (The Business Times, 23-24 July 2016). There are 11 stocks below 12.43. These stocks have decent dividend yields (except for City Developments). The Price-to-Book ratios are at 1.0 or below 1.0 (except for OCBC at 1.1).

With low PE ratio, there is potential for upside to share prices provided the company can sustain profits/earnings. The last part of the statement is the key in stock-picking decision-making. It is future-oriented. Can these businesses generate profits that can excite the shareholders?

Note that selecting a single stock for investment carries risk. A better approach is to invest in a basket of stocks, e.g. Exchange Traded Fund (ETF), to spread out the risk.

Disclaimer: As in any investment advice, please engage buy/sell decision with caution. The entry stock price and exit stock price are matter for careful consideration. The author disclaims any liability arising from this blog post. Use it with caution.

Copyright © 2016, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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