Economy Malaysia and its effect on banking stocks.
Your Facebook page will just give you what you like to read yeah
Sometimes I am tired of debating with someone who says that the Malaysian economy is doing very badly. Perhaps there are many reasons for them to say so. Perhaps this person’s friends are all doing very badly and were trying to borrow money from them. I just hope they did not derive that conclusion from their FB page because FB will show you what you like to read because they want you to have higher interactions in FB.
Anyway, here is one sign why I think economy Malaysia is building up steam. It represents the industry because if the business environment is negative, then the working people will suffer and the banks will all be in trouble… Here are some recent articles about how the banks are doing in actual numbers.
Article in themalaysianreserve.com Public Bank records 20% increase in net profit for 4Q21.
Article in thestar.com.my Maybank posts net profit of RM2.06bil in 4Q, declares 30c div
Article in theedgemarkets.com Kenanga Investment Bank to pay 10.5 sen dividend bonanza after record profit in FY21
Article in themalaysianreserve.com Malaysian banking sector dividends to increase by 26% YoY in FY21
What happens to all who bought banking stocks earlier?
If they have 1,000 units of Maybank and let’s say they bought it at the closing price on 25th February 2021 which is RM8.88 per unit, then the latest dividend announcement of 30 sen from Maybank meant that their returns just from this 1,000 unit yields them 3.37% returns. This 3.37% is over 60% higher than our paltry 2% return on fixed deposit. This is why some investors focus on buying just dividend stocks.
If the same person bought it end of 2021, Maybank’s share price was RM8.30 per unit. 30 sen dividend based on this price would yield a return of 3.6%.
What happens in the future if dividends continue?
If the dividends continue to be declared every quarter from now onwards, then the holder of these banking stocks will either have yields which are many times higher than the fixed deposit rate or the share price will move upwards so that the yields are lower but then these banking stock holders would thus enjoy capital appreciation if they were to sell those banking stocks.
I have NO IDEA at all whether dividends will continue yeah
If we think the economy will continue to do sufficiently well, then this will be positive for banks. If the demand for cars move upwards, then the car manufacturer stock price will also move up. If a certain developer is able to sell all its new launches, then this will also help its profits in the future and subsequently the stock price. Just need to remember that just because profits are going up does not mean a company will declare dividends yeah.
So, truth is, I have no idea if dividends will continue. If you think so, go ahead and invest into some stocks you believe in. It does not need to be banking stocks. Perhaps a biscuit producer can also be a goo stock to buy especially if everyone you know loves that brand. Investing into a good company may not be as hard we as think. All the best in your choice(s) and all the best to me as well.
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