4 Blue Chips With Low Valuation and High Dividend Yields

A Quick Look into 4 Blue Chips Trading at Low P/B with High Dividend Yield

Price to Book (PB) Value measures the difference between current share price and the book value per share. Book value, as the name suggests, refers to the amount of assets carried on a company’s accounting book, after deducting all its liabilities. This is also known as the Net Asset Value (NAV).

By dividing the book value or NAV by the total number of shares, we will get the NAV per share. Comparing the share price against NAV per share gives an indication of how cheap or expensive the share is vis-à-vis the amount of net assets embedded in each share.

The formula of Price/Book Value

All things equal, between two shares, an investor would pick the company with lower PB since it is deemed cheaper, and there is a greater chance that market, being efficient in the long run, would close this valuation gap and push the share price up to match its NAV.

Dividends are another key return metric to consider, as it represents cold hard cash disbursed by the company into shareholders’ pocket. Dividend returns are less volatile as companies do not change their dividends daily, unlike share price which represents capital returns, that can show a wild swing in a short span of time.

So I thought it would be interesting to identify the STI component stocks with the lowest PB ratio and with a satisfactory dividend yield of above 3.5%.

Here are the 4 companies I found and a quick brief on them.

Hutchison Port Holdings Trust

PB: 0.43

Distribution Yield: 8.7%

Hutchison Port Holdings Trust (HPHT) is a business trust that owns deep-water container terminals in the Pearl River Delta including Hong Kong International Terminals and Yantian International Container Terminals in Shenzhen. In total, it has a total of 36 berths that handled the total throughput of 24.3 million twenty-foot equivalent containers in 2017.

In 2017, its Revenue and Total Operating Profit fell by 3% and 5% respectively to HKD11.55 billion and HKD3.6 billion.

More recently, its half-yearly revenue for the period ended 30 Jun 2018 remained stagnant at HKD5.45 billion, while Operating Profit fell 4% to HKD1.59 billion.

HPHT annual Distribution per Unit since 2013. Source: Shareinvestor.com

While it spots a juicy distribution yield of 8.7%, HPHT’s Distribution per Unit in the past 5 years has been decreasing. As seen from the diagram, its distribution was slightly more than 5 cents in 2013, which has since dropped to 2.63 cents in 2017.

CapitaLand Limited

PB: 0.73

Dividend Yield: 3.6%

CapitaLand Limited is one of Asia’s largest real estate company, with operations covering the full spectrum of real estate development activities ranging from building, developing, operating and funds management of residential, retail and commercial properties. As of 31 Mar 18, it has Assets Under Management (AUM) of S$91 billion.

In 2017, its revenue stood at S$4.61 billion while its Operating Profit after Tax and Minority Interest (Operating PATMI) was S$ 908 million. In 2016, the figures were S$5.25 billion and S$865 million.

As for the latest quarterly earnings, its revenue and PATMI was S$1.34 billion and S$107 million. In 2Q 2017, the figures were S$992 million and $582 million.

CapitaLand Limited annual dividends since 2013. Source: Shareinvestor.com

CapitaLand Limited’s dividends have increased from about 8 cents per share in 2013 to 12 cents per share in 2017. This is a 50% increase over 5 years.

Yangzijiang Shipbuilding Holdings Limited

PB: 0.79

Dividend Yield: 4.2%

Yangzijiang Shipbuilding (YZJ) is the largest non-state-owned ship-building company in China that produces a broad range of ships and vessels such as containership, bulk carriers, Liquified Natural Gas vessels and Very Large Ore Carriers, with 5 shipyards located along the Yangtze River.

It has a shipping arm that owns a fleet of 13 bulk carriers leased out to generate charter revenue. It also operates other shipping related services such as ship design services and ship demolition.

In Financial Year 2017, its revenue was RMB19, 206 million. This was an improvement from 2016 revenue of RMB15,089 million.

Its second quarter 2018 results recorded an improvement with Revenue and Net Profit Attributable to Shareholder of RMB7,963 million (2017: RMB3,791 million) and RMB994 million (2017: RMB719 million) respectively.

YZJ annual dividends since 2013. Source: Shareinvestor.com

YZJ annual dividends have been relatively stagnant over 5 years. For full-year 2017, its dividends per share were 4.5 cents.

Singapore Airlines Limited

PB: 0.82

Dividend Yield: 4.2%

 

I guess I do not need to share too much about Singapore Airlines (SIA). It is one of the most well-known Singapore brands and has won numerous best airline awards.

Its revenue in FY2018 was S$15,806 million, higher than the S$14,868 million in FY2017. Profit before Tax was S$1,101 million in FY2018, doubled the similar figure of S$518 million in FY2017.

As for first quarter FY2019, SIA recorded revenue of S$3,844 million, a similar figure to FY2018 first quarter – S$3,864 million. However, Profit before Tax fell to S$184 million from S$416 million a year earlier.

SIA annual dividends since 2014. Source: Shareinvestor.com

SIA dished out dividends that ranged from 21 cents to 45 cents per share in the past 5 years. Take note that in 2014, there was a one-off special dividend of 25 cents that boosted the dividends to 46 cents that year.

In Summary

A company with the low valuation or high dividend yield does not necessarily mean it is a bargain stock. It is important to look into other factors such as the quality of the business and management as well. However, for investors looking for deep undervalued stock, this might be a good starting point for you.

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CS Jacky

CS Jacky is a Remisier and Financial Adviser with Phillip Securities Pte Ltd. Graduated with a Bachelor in Business Administration (Finance), he has been investing in the stock market since 2010. He identifies companies with good prospect trading at a low valuation using a unique blend of fundamental, technical, and portfolio analysis. He also holds REITs and dividend paying shares. He holds regular seminar to share about market updates, investment insights of specific stocks in his watch list, and overall wealth management for retail investors. He is the owner-blogger of 'CS Jacky - 360 Wealth Management' and a guest writer for Value Invest Asia.

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