Firstly, I must apologise for being silent for three odd weeks. It has been busy and very productive. Besides the administration of setting up the Double Digit Dividend Fund (the ‘Fund’) and speaking with potential investors, the largest task that has consumed my time is to build a portfolio of possible candidates to invest in from 1 April. This will be day one for the Fund if all goes according to plan.
In September last year, I wrote there were over 183 stocks in our research universe that offered double-digit dividends.
For further details please read my journal: J#19: Rich Pickings! There are over 183 companies in our research universe of potential Double Digit Dividend investment gems.
We have started sifting through these stocks and have also expanded our suite of data providers to include MorningStar and two other third-party providers.
There are now eighteen (18) companies in our shortlist, and they are trading on fifteen (15) different stock exchanges (countries). The majority have 10%+ yields net of withholding taxes. The table below gives you an idea.
We have named four of the companies and written in-depth reports about them as free recommendations to anyone interested. If you are new to our website, you can download these reports on our “Recommendations” page (with the exception of Egyptian Tobacco which was covered in Journals 25 to 28). Just create a free account on our website to access the Recommendations page.
I have NOT provided the names of the remaining 14 companies in the above table as it is would be unfair to investors of the Double Digit Dividends Fund.
Once the Fund is up and running, I am considering writing about most of these names, but with a sufficient grace period to ensure that the Fund is not ‘front running’ its investments.
If you’re interested in finding out more about the Fund, I will be hosting a Zoom call to present the details and answer questions. I’ll also go over some of the potential investments. The link to join the call shall be sent by email ONLY to those who have accessed the Double Digit Dividends Fund’s Private Placement Memorandum and the Summary Information Sheet, (“Level 2 Members”).
The Zoom call shall be held on:
Wednesday, 10th March:
If you are not a Level 2 subscriber but would like to attend the call, please upgrade your account to a Level 2 subscription (upgrades are FREE of charge) or send me an email at: email@example.com
A spread of stocks from 15 different stock exchanges provides a good selection to build a diversified portfolio. We have also classified in the tables below the 18 potential investments by:
|4||Consumer Electronic Products||1|
|5||Electrical Power Supply, Utilities||2|
|8||Funds & Asset Management||1|
|12||Real Estate - REIT, Income Fund||1|
|Market Cap||Sum of Market Cap |
A: USD 0 to 100M
B: USD 100M to 500M
C: USD 500 to USD 1B
D: USD 1B to 5B
E: >5B USD
|Daily Turnover (Volume in USD) - Ranges||Companies By Turnover Range|
A: USD 0 to USD 50K
B: USD 50K to USD 100K
D: USD 250K to 500K
E: USD 500K to USD 1M
F: > USD 1million
With a total of USD 41 billion dollars of market capitalisation spread over 18 potential investments listed in 15 different countries, we are looking predominately at small to mid-cap names in emerging and frontier markets.
Blended with the odd investment in a large market-capitalisation company listed in a “developed” market, small to mid-cap names in emerging and frontier markets are the places and company sizes where few people look and can therefore offer great and, if researched well, safe double-digit dividend yielding investments. The Double Digit Dividend Fund is a “niche strategy” and where I shall park a substantial amount of my own wealth to generate income.
Naturally, we are UNLIKELY to invest in names that have an extremely small market cap and very low turnover. There are 4 companies in the short-list that fit into this category (market capitalisation between USD 0 to 100 million, and a daily turnover of up to USD50 thousand dollars). We have nevertheless included them as names to be researched in the event that they offer something very compelling where a “special situation” investment can be achieved/negotiated with other shareholders and management. This requires deep analysis.
On top of the 183 stocks identified in my journal J#19, there are many more stocks to research and uncover if they are worthy investments. To this end, and as elaborated in J#19, our analysis goes back to primary sources of information such as the company’s financial statements and their announcements to the stock exchanges.
You would be surprised to see the, sometimes, contrasting information that is published in the public domain (Reuters, Bloomberg, MarketWatch, MorningStar etc.) and how erroneous and misleading it can often be.
In this regard, a good friend of mine, Charles H, a former Lehman Brothers bond trader and a qualified Chartered Accountant and Secretary, is in charge of verifying and recomputing the company’s operating metrics, valuation, dividend pay-out and leverage metrics. He is based in Singapore. A picture of Charles busy at one of our “analysis sessions” is produced below. (He is camera shy and hence it is a picture of him not looking into the camera.)
There is also Andrina C, she works from her home in the east coast of Singapore and we work together via Zoom call. Her role is to vet the dividend history of each company announced through its respective stock exchange and/or its financial statements dating back at least three years. Andrina also produced the dividend history of the tobacco stocks I analysed in the 4-part series covered in Journals 25 to 28.
Vetting dividend histories is an important component of our analysis. After all it is the dividend payments that provides our return. Dividend histories also provide a track-record of management’s ability and commitment to deliver returns to us and, unlike financial accounts, dividends cannot be “fudged”. Either the company pays a dividend or it does not.
There are plenty more stocks to review. Andrina and Charles’s work is important, time consuming but rewarding!!
The 18 stocks we have so far identified are by no means the final portfolio of investments. They are our first batch of candidates only. There are plenty more stocks we are looking into. One of the challenges we face is that we do not know what their share prices will be come 1 April when the Fund starts to deploy cash.
For example, Eastern Tobacco (Egypt) was a capital efficient company (refer to journal J#26) when I recommended it back in November 2020. If the Fund was already up and running, we would have invested in it for its 10.5% yields, net of withholding taxes.
Its yield has now dropped to 8.8% as a result of the share price appreciating by 21% from EGP11.97 (stock price as of 5th of November) to EGP14.50 (as of 23rd February2021). Should its price further appreciate by 1 April it may no longer have a yield worthy of our investment.
The same can be said of my other recommendations to you.
The table below summarises my investment recommendations made. All of them have had capital gains between 13% to 36%. All of them have seen their yields drop since their recommendations. Navigator Global Investments has seen a 13% capital gain and its current yield is 6.5%. This requires a follow up journal by me.
As you can see, when you find a stock of a high-quality business yielding over 10%, the opportunity doesn’t usually last long.
It is time to switch back to my research hat. I shall update you with another journal hopefully before our 10th March Zoom call.
Until then, stay happy and wishing you good investing.
The investment portfolio your Dad is building for the Double Digit Dividends Fund covers 15 different countries. This number is likely to grow and it shows you it is a big world out there with plenty of opportunities.
It is waiting for you. Go Explore!