Be a Dividend Investor

A dividend investors goal should be to generate a increasing stream of sustainanle dividend income, through careful selection of dividend growth stocks. Their investment plan must not be dependant on daily market fluctuations. I am not being overconfident but a dividend investor must be able to say confidently that "daily fluctuations have no bearing on my investment plan" because i have bought this stock at a great discount and will keep building on it for the next 10 or 20 years (through 2-3 market cycles). 

Dividend investors out there, do not worry because most of your stocks will keep sending you dividends quarterly or annually (as long as the company is well managed, increasing in profitability year after year. What is most important is to focus on quality dividend stocks and purchase them at attractive valuations. In Singapore's short history, there are very few stocks that i can think of which have actually raised their distributions for at least ten consequtive years and may continue to do so for the next ten years. 
Companies like Singtel pay out dividends regularly, and it has increased over the past 11 years. They actually are a bit unpredictible because in 2003 and 2009, there was no increase. While on some years, you would get Special dividends, which is awesome. 
Take away the special dividends and other distributions and just look at Interim/Final dividends over the last 11 years and take the average:

2002 >>> 2013
5.5c >>>> 16.8c (dividends increased average 10.8% annually)
Which is not bad right?

As dividend investors, we should try and avoid unpredictability. I firmly believe that a strong management team which focuses on consistently sharing a portion of the profits with investors in the form of dividends will continue doing so, as long as the business is able to support it. Dividend Ranking website is pretty good to do the research on dividend history:
http://www.dividendsranking.com/index.php

I pulled this one for KeppelCorp from the above website:

There are of course another part of the dividend equation. In Singapore you can invest in REITs or Business trusts which promise you regular dividends (90% payout for REITs). But REITs  are not the same as company stocks. They did not promise an increase in dividends over time, just that 90% of the profits will be payed out, which means if they profit less in the particular year, you get less. Obviously. So there is the risk of unpredictability.

You know i wish investing in dividend stocks could be so easy that you can just buy it  and close your eyes. But you cant do that. Investors need to periodically monitor the financial health of their stocks. It should not be very complicated once you have done initial background research on the business and shareholding structure. Fundamentals of the company do not change overnight. Singtel will most likely be in the telecom business the next 10 or 20 years. Keep an eye out for news related to the particular stock such as mergers and acquisitions, that could prove very profitable or spell disaster in the making.

The bottom line is this: Market fluctuations should not scare intelligent dividend investors, instead it should be used as opportunities to build on your portfolio or trim off some profit. Steep drop in prices for dividend paying stocks provide excellent entry points for long term wealth accumulation. Personal note, Watch out for these in the next crash: Singtel, Singpost KeppelCorp, Jardine related stocks or if interested overseas, Coca cola; Colgate; Procter & Gamble; Exxonmobil; Kimberly Clark; Unilever; Merck & Co; Sanofi Aventis; Eli Lilly; Johnson & Johnson. If you noticed, Healthcare stocks have pretty good dividend payout rates but they are slow growth stocks.  

Market Sentiment vs My Sentiment

Past few weeks I am finding it difficult to adjust my sentiments to how it is being played in the stock markets. Referring to my previous post in mid August "Final Push", It is getting harder to stand my ground or belief that there will be a final bull swing before another major crash. Since the month of August has been a bloody one, markets all around the world taking a huge hit. If there is one thing i still do believe in, its that always stick to valuations. 

Chinese stocks for me seemed undervalued with a lot of upside. My timing has never been perfect but my investments in China Life Insurance and BYD have yet to drop below my buying price, which tells me that I bought them at strong support levels. 

On the other hand, Singapore stocks have not fared well in the past few weeks. Mixed feelings arise as prices drop reducing my profits but also creating opportunities to add into my portfolio. 
As for REITs, where do i begin? Sabana REIT has fallen by almost 20cents/share. Cache REIT (see pic below) It has become even more attractive at $1.10 - $1.20 range. Since their dividend payouts will give you >7% for just holding onto it at those prices. I am happy to hold onto my shares of CACHE but not going to buy at those levels. Since the last drop broke through their supporting trendline, technically there is no way i can say with confidence that it has reached a bottom. I have a feeling it will keep falling to the dollar region before news around properties and interest rates are not looking good. People (investors) are anxious about REITs and the smart ones are pulling their money out of it. As for me, It would make sense to buy more below $1.00.

 Ascott REIT also tells a similar story but it has not seen such a big drop. Maybe the investors of Ascott REIT know what a great investment it is. Especially since they are expanding strategically into rest of Asia. I like their business plan, and their dividend payouts even more. Its a steady stream of income. Just a note of the price levels. It has been trading around $1.20 this week, going forward, I think it will come back up to >$1.35, no doubt. 
Those people who missed the opportunity to get a piece of this REIT should do so before its too late (*Of course do you own research first and then make an informed decision)
Here the graph of Ascott REIT below:

Yes it has crossed the supporting trendline (that is worrying me) but it is being supported by a resistance turned support line at $1.15. Also note the volume being traded. Comparing it to CACHE REIT above, volumes being traded are below low. At $1.20 it is still very attractive to me. I have to say, still not worth add onto my position unless i get it at close to a dollar. 

I suppose my investment philosophy is simple. Always reserve money for further reinforcements. Usually break up your investments into 4 parts. Buy in more as it gets cheaper. Sell it higher to reap the benefits if the stock is not worth holding onto. Don't speculate and dont surround yourself with negative thoughts. There will also be people telling you negative things, "Get out now, while you still can" and "I told you so". You decide when its time to get out. Patience is a virtue, so be patient.  If you have been following my blog posts, you will realise that we are still in the late stages of a 3 year bull market. I would start to worry in the 1st quarter of 2014.  

Final Push

I have been very quiet the past few weeks for 3 main reasons: 
1. There was little movement in the stock market
2. Been away for business trips past 2 weeks 
3. Time to relax and enjoy the double combo holiday: Hari Raya + National Day

However the timing seems to be right, everything seems to be setting up as expected. Its nearing the final push for the stock market. I expect to see a perfect bull trap being set up by 1Q 2014. Hopefully by then I will have the opportunity to divest 60% of my portfolio in preparation for the next bear market. 
(refer to previous article for chart:
http://hiddeninvestor.blogspot.sg/2013/07/hectic-june-but-quiet.html )

One fine example is ExxonMobil, I am waiting for the final push in the next half year because i expect oil prices to increase, and oil producers to benefit in the short term. Exxonmobil has the potential to break into the $100+ region, being supported by both the bullish trendline and resistance turned support at $90 region. I am hoping their final push will be fruitful for all invested in its share. But be weary of what is to follow after the next peak is reached.

Disclaimer: The above estimation of market movement/direction is solely based on my opinion. Please conduct your own research or engage in a professional financial expert before making any investment decisions.

Investment Strategies To Beat The Market

I started this blog with the premise to inform other fellow investors out there on how to stay ahead of market cycles. To me, investment strategy should be making sound estimation of market direction ahead of the all the news and crap you hear and read about. Because reacting to news is often too late.
Today's entry is very important to me because i try to understand why the market is reacting in certain ways and why the next big crash is constantly being delayed through manipulation by central banks around the world economic powers.

The graph above clearly shows S&P movement from March'09, as it moves up in steps every time a new Quantitative Easing is introduced. Naturally this is not healthy because of the external influence QE has on the market. And we are left with conflicting data, S&P should not be so high when we still have alot of companies with reduced PE ratios, earnings and growth decline.

If you are looking for value, Europe seems to be a better option than US and Japan. Europe is more than 15% cheaper then US in terms of its P/E ratio (EURO STOXX 50-15.57 , S&P 500 - 18.43) giving it room for higher profit. 
Japanese market on the other hand, i personally will avoid because the monetary policy implemented will result in higher volatility (plus i dont really have the extra cash to gamble away). 

In these kind of scenarios with external influences, technical analysis becomes inaccurate and unreliable in my opinion. However one can still gear their investment strategy to pick the best sectors that perform well during late stages in a bull market. I need to pull up my favourite picture below which explains market cycles and recommendations:

I follow this graph very closely. We are in the late bull stages in the stock market cycle. For very good reason, there is no timeline on the x-axis because stock market cycle time can vary due to different influences. At this point of time i strongly recommend holding onto non-cyclicals defensive stocks such as utilities, consumer and healthcare. 
Keep your eye on opportunities in cyclical stocks such as in the luxury goods, tech stocks and financials but dont buy them yet, wait till late bear market stages. 

Dividend investing is always nice to have, keeping at least 30-40% of your portfolio based on regular dividend paying stocks is a strategy i adopt but keep a look out for dividend cuts, cancellations or script dividends.

To summarise, it seems the US market is already quite high, it would have to go to higher highs before the next market crash. This does not mean we should start worrying and panicking. The key thing would be to take profit where targets are reached, not to be greedy and keep at least 40% of your portfolio in cash by end of the late bull run. (Frankly no one knows when that might be, could be end of 2013 or could be after 1st Quarter of 2014) 

Being diversified is not a bad thing, or is it?

Sometime i wonder if being too diversified is a bad thing? The biggest fear is not being able to react quickly enough to a global crisis like the one we experienced not too long ago. In the event of a market crash, i hope to reduce all exposure to US, Japan and HK and 50% of SG. Meanwhile it would be unwise to take advantage of the wonderful opportunity presented to us living in Singapore, the opportunity to play almost any market in the world. What is your exposure level to world markets?

















 

I also analysed my investments in terms of sectors, the graph is below. I usually pay more attention to sectors because of the fact that certain sectors perform better during certain times of the year and during market cycles. You will notice that my exposure to commodities sector is minimal and i would keep it under 10%. I realise my exposure to REITs is 30% but i am not worried because they are mainly hospitality REITs for example Ascott and FarEast. I would be worried if REITs which are overvalued, for example FIRST REIT, K-REIT or CMA. All in all, I am gearing towards defensive stocks more hence my exposure to Consumer and Life Insurance sector. Which sectors should i get out of by end of this year? Definitely Oil & Gas, Commodities, Utilities and Manufacturing.





 

In Search of Fair Value

One can get carried away when there are quite a few undervalued stocks after the recent market pullback. I certainly am not the only one who can see tremendous value in chinese stocks after it has been steadily declining since 2008. When it comes to stock picking, pick the winners or wonderful companies at fair value. Stay away from laggards at all cost. 
It is the perfect time to reflect on a wise saying:

It's Far Better to Buy a Wonderful Company at a Fair Price than a Fair Company at a Wonderful Price - Warren Buffett

Recently bought a piece of ChinaLife insurance, which is undervalued by the way. It is THE biggest life insurance companies in the world and i see great potential for it to grow in the near future as lower middle class people in China begin to be able to afford insurance policies. Another reason for investing in insurance is because of the nature of its business, which i like. Its the best kind of business after casino business because people will continue to pay you monthly until he/she reaches their retirement age of their policy lapses. Can i call it legalised "protection money"? However negative my viewpoint may be of this kind of business, i still acknowledge that the business model behind insurance companies has huge potential to make returns even during a market downturn. Therefore you many notice that insurance companies even if affected by market swings, are usually the first companies to bounce back. Anyway i am taking a long term view of China Life insurance and anything below HKD19/share is a fair value for a wonderful company. Below is the chart. I must say it is not the best technical analysis but i see strong support around HKD18, it keeps bouncing off around that price.

I should also give you example of a company i am staying away from. Petrobrasil (PBR) which recently broke through its lowest price of $13.50. I just dont know where the bottom is anymore because it is an great price for a company that is just not doing well. And if you look at the chart below from 2002, it seems the bottom was actually around US$3/share.

In terms of companies listed in SGX, HPH trust is still cheap because i see shipping business picking up rest of the year. And as talks between China and US to improve trade relations continue, trading volume will go up for the rest of this year. Take positions early and get out as soon as everyone else starts getting greedy. Because people are still fearful now, which tells me to do exactly the opposite. Also the VIX (volatility index) is going down, which if you already know indicates that we might see market uptrend soon.(below 15 is good, below 10 even better)

Hectic June but quiet

It has been a hectic time in June in both at my work and financial markets worldwide. I have been quietly watching the markets for opportunities and let me tell you..opportunities are plenty right now. Most counters in Singapore have been correcting to attractive buy levels, but not all. My hands are itchy but i refrain myself from going crazy. Prior to June, i already reduced my exposure in volatile stocks and started to hold onto more cash. Hope you did the same...because short terms corrections do occur during a bull run. Personally i believe we are not hitting peak levels YET. I may be dead wrong and we are actually in the starting phases of a full blown market crash. I am still doubtfull. So lets get help from this famous chart below:

 
Could this be the perfect bull trap right now? YES
Could this be just a normal correction before we head to higher highs (pre 2008)? YES 

I guess we will only know for sure when it is over. My only advice is stick to valuations which are realistic. For example, Starhub has dropped 12% from its peak at $4.70 to $4.10 level now. Yes it is cheaper but i wouldn't put a single cent into it now because it is still too expensive. On the other hand, Chinese stocks have really been doing down ALOT and offer great value, have a look at China Life Insurance, the biggest life insurance company in the world. 

Aussie Economy in Turmoil

Last year, i was contemplating on opening a AUD fixed deposit, but interest rates were dropping, AUD/USD rate was also peaking. Thank GOD i didnt. Recent events have peaked my interest again in the Aussie Dollar though.

AUD/USD fell to its lowest level in more than 2 years, home-loans are slowing down and it does not look like a safe-haven currency anymore as their interest rate advantage narrows. It has taken surprisingly long for this correction to happen. I believe this is because of speculation around the US Feds announcement that it will reduce stimulus this year.

The only things going for Australia were demand for its Housing and Commodity (mainly from China). This even helped Australia escape a big economic bust in 2008, however things are looking bad now. China is slowing down definitely but still growing at a slower pace...and i hate using the terms "hard or soft landing". 

Australia's labour costs are ridiculously high, their housing bubble has BURST and their commercial real estate can only go down from here. SO have a look at the Real Home Price Index Chart over a period of more than 100years. Aussie housing market has been truly sitting in a bubble waiting to burst. At the risk of sounding like Alessio Rastani, yes i do dream of recession, make things cheaper for the average investor like me.

     

Petrobasiliero (PBR)

I must admit temptations are hard to resist. Sometimes you have to stop yourself from making silly mistakes. PBR has been on my radar for the past 3 years and there has been times when i almost executed an order to buy it at $40 then at $30. At the back of my mind, someone keeps telling me to speculate on beaten down stocks. But luckily i have my brother who is far better at technical analysis than me, who keeps pointing out the obvious flaws...And you know what, i appreciate 2nd opinion on these things. Looking a the shorter time frame from 2008, i realise that PBR is a $60 - $70 stock trading at such a discount. It is the official, government owned oil company in Brazil, heavily invested in Ethanol production and supply. It enjoys an economic advantage (moat) over other players in the South American region with large number of assets on and offshore.

 BUT the real question is:

Why has it not performed as well as ExxonMobil, Shell or Chevron? What is wrong with it? 
My best guess is: POOR MANAGEMENT or in this case too much Micro Management and Interference from corrupted government officials.

Lets look at long term trend (technically speaking):

Even the long term support is no longer valid. Technically there is just nothing positive, except that previously the bottom in 2009 was around $14 region and just this year crossed the bearish trend down from 2008 peak. I wonder if NOW this stock has actually started to trend upwards. 

Fundamentally its rubbish, Technically is somewhat unpredictable at this point. Buying PBR would not be investment, it would be a gamble, which i must stop myself from doing.

But in all seriousness, the lesson to be learnt here is that; Dont speculate, research on the background of the company, look at their financial data, if they are losing money for some unknown reason, stay out of it. If the company doesnt make money, shareholders get NOTHING too. Technical analysis is great for making decisions clearer, always rely on technicals before executing any order.

 

First REIT pullback

Been watching REITs closely for some time now. The recent pullback in REITs has me more interested for 2 reasons:
-Their still relatively high yields
-Healthy correction driven mostly by FEAR

Of particular interest is First REIT because of the fact that i like the business sector they are in: Hospitals/Nursing Homes in Indonesia/Singapore/Korea. They have shown themselves to be aggressive in expansion and since 2009, their stock price have gone up significantly from 30cents a piece to almost 1.44 at its recent peak.

At the moment, the counter is undergoing a retracement to 23.6% on the Fibo chart, testing levels on $1.17 so i am happy to see this an another opportunity to get into this again. But i would wait until 50% retracement from its peak to $0.99. Am i being too ambitious? According to the chart though, a 50% retracement correlates with the major supporting uptrend for the past 4 years. Something to note here: we are seeing low volumes being traded.

I regretted selling FirstREIT prematurely at $1.04 but was happy to clock in almost 30% profit last year. Maybe this pullback is going to be a good chance for other people who have been sitting in the sidelines.

Most of the REITs are displaying similar behaviour, I just feel there has been some profit taking from retail investors and institutional investors alike, the general market trend still Bullish. Its not over till the fat lady sings. At the moment though, just sit back and wait till markets stabilise before going in again. Here is Keppel REIT analysis below which is similar retracement but general trend still upwards:

Note: High volume traded recently suggest there might not be much reversal for Keppel REIT. But the bottom uptrend line is still intact. Currently resistance turned support line @ 1.40 is being tested. Wait and see if this breaks down.

Disclaimer: We have not reached a market peak yet but dont take my word for it. Do your own research before making any investment decision. We could as well be experiencing the beginning of a downward trend. 

Importance of Taking Profit

Always remember to take profit when realistic targets are reached. In my experience, someone who fails to take profit at their predictive target price usually ends up never finding the right time to sell. Putting aside my greed and other emotions, decided to followthrough with proper execution. I was in this business to make my money grow, not to fall in love with a company and hold it till i die. Remember folks, you own a piece of the company but in actual fact, never really run the business, so its a risk to invest in uncertainly. Give yourself some relief by taking profit. 

SO...i took profits on XMH holdings which i bought during their IPO launch a couple of years ago. Still remember the times when they went down under and left me with a huge loss of 80% of my invested capital. I told myself to hang in there, remember rule number 1: "Never lose money". Surely enough, the time has come for me to sell it off at almost 66% profit (including dividend). 

Today i am happy.

TEPCO finally making a comeback after 2 years?

Perhaps the biggest blunder in the few years of investment has been with TEPCO, Tokyo Electric Company (JP:9501). It was stupid times when i was too aggressive and relied on speculation. Right after the devastating tsunami in Japan where everything in Sendai was wiped clean, Tepco nuclear plant faced daily risk of meltdown, their stock price plunged to the ground. And I foolishly invested a small amount of money in the hopes of making a quick buck.  Soon after, rumours started flying around that the company might be delisted and taken over by the japanese government.

Lesson learned, never invest in a company directly involved in the tragedy. Same goes for BP after the Gulf of Mexico oil spill, where is BP now? still lagging behind major players, lost their credibility, their TNK-BP partnership in Russia broke down somewhat.

Getting back to TEPCO, there were times when i was down nearly 80%. Having lost all hope of regaining the money, i decided to leave it as it is, to remind myself everytime i checked my investment account. Stubborness took over and i never sold it at a loss. In my defence, before buying into the counter, i performed a thorough study and actually believed TEPCO will rise again one day. Believed in their 2020 vision of cutting fossil fuel dependancy. Nuclear power is actually 30% of their total revenue and they are diversified into other forms of renewable energy. The fact remains still, TEPCO is Japan's biggest power company by generating capacity. 

Recently TEPCO rose a whopping 18% to JPY522 on the TSE yesterday and further risen to 613 today. One of the best performers this week from Japan. I am now at 17% profit from buy price but still not going to sell. This is because when i bought it SGD-JPY rate was 62, the Japanese Yen has depreciated by more than 30% over the past year. In terms of actual profit/loss...i am still at over 20% in the red after commissions and fees.

I am sharing this case study so that others may benefit and learn from my mistakes:
1. DONT INVEST IN COMPANIES DIRECTLY INVOLVED iN A DISASTER
2. DONT FORGET CURRENCY EXCHANGE LOSS   

Hope for the Best, Prepare for the Worst

I actually did go away for a week in May after selling off all my Singtel shares but it seems the stock market is relentless. Everyday climbing higher and higher up the mountain until we eventually reach the cliff at the end. Perhaps the best strategy right now is to hold and see, regardless of how heavily you are involved with the stock market, it is always important to know exactly where your emergency exits are at all times. This includes paying attention to technicals as well as fundamentals and maintaining a short term view on the positions you own.

In any case, it helps to be prepared for the worst case scenario, i.e. to evacuate the stock market when the time comes, you will stand a much better change of emerging relatively unscathed vs. those that are fully invested and get caught in a market crash. Personally i position myself for such an emergency scenario by shifting capital to higher quality names which are less volatile and offer attractive valuations with strong technical support. It will do much better then lower quality, high beta and momentum stock (especially penny stocks). 

By the way, I have been thinking, would you consider ThaiBev as a risky investment? After acquiring a portion of FnN, they have strengthened their position as a major player in this region, valuations also look great. That is a question i pose to you fellow readers.   

A little on Japan
It seems that Japan is on this unstoppable path to financial meltdown. Over the last 20 years,  the Japanese economy has gone through property and financial bubbles. Their ageing population is not helping either, increasing social burden on the declining number of taxable labour. As a result of this, Japanese economy has been stagnant and undergoing deflation. What is happening now is Bank of Japan (BOJ) is aggressively pumping in money to combat deflationary pressure by targeting 2% inflation in the next 2 years. However you may feel about this move, Japan is still heading for a serious market crash....which everyone is going to feel. Don't forget Japan is still the third largest economy in the world, they own massive amounts of US treasuries and their financial institutions are intertwined with the global market. Any weakness or shock in Japan, would be MUCH MUCH bigger than Greece, it would send financial markets around the world in a frenzy.

For now though, hope for the best....diversify and relocate capital to safer avenues, preparing for the worst to come in 2014. 

Disclaimer: The above is only my viewpoint on the market situation now. It is in no way advice to get in or out of the market. Investing involves calculated risks and you may lose all your money. Please consult professional advisor before making any investing decisions for yourself.

Sell in May and Go Away...to China?

Its the time of the year when i usually do a re-assessment of my investment strategy and capital allocation in order to stay ahead of market cycles. I am guilty of holding onto some counters for way too long even after they have reached my target price. It seems most brokerage houses keep upgrading stocks and shifting their target higher and higher. One such example is Singtel, now its target is $4.20? sure, maybe but not in the short term. I had to take profit early and trust me Singtel will come down eventually to find support at a lower level before the final push to the $4 region. All of my REIT holdings are also above target prices, Genting seems to be under the bus at the moment so i shall have to wait longer for it to reach my target price.

Anyway in order to do capital relocation, i need to free up some money. Chinese stocks look super attractive at the moment, with such valuations one cannot resist. I am going to pick individual counters which are growth stocks and play the broader index to diversify. 

Another point, I know for a fact, battery technology we currently use is outdated (over a century old). Cant wait to say goodbye to the pencil batteries. Having worked on Lithium-Air batteries myself, next generation battery technology is headed towards leaner, paper thin, Lithium Ion batteries with a greater capacity and recyclability than any existing alkaline or lithium cadmium ion battery. Therefore, i invested in BYD, manufacturers of next generation lithium ion batteries, PV cells and Electric cars. They are registered on the HKSE since 2002. Even Warren Buffet himself bought a huge stake for himself, however i must say, his timing was way way off. But you know what, this is a long term play and he knows it. Small retail investors just dont have the sort of capital to throw around so our timing has to be at least accurate. 

*Additional note: Interestingly fellow blogger WealthBuch also started taking profits. Refer to posted link below:
http://wealthbuch.blogspot.sg/2013/05/taking-little-profit-off-table.html

Disclaimer: Same as usual, dont just take my word for it. Perform your due dilligence before making an investment decision.     

Investing in commodities? Who are you trying to fool Sunday Times?

I felt rather outraged by the article on Investment section in Sunday Times yesterday. Please be careful not to be persuaded by amatuer-ish writing on investments in the papers. To them its all about how many publications they have and how much money they are collecting. 

Referring to my previous article:
http://hiddeninvestor.blogspot.sg/2013/04/gold-in-not-investment.html

This time, I am going to take an example which i read on SeekingAlpha and adapt it to our Singapore style. lets see their comparison for Coca Cola vs. GOLD:

Lets say you have $15,000 to invest now and you have two choices and keep it invested over a period of 10 years. Lets assume Coca Cola continues its earnings and dividends growing at 9% annually. Annual dividends are still low, around 2.6%.For $15,000 now you can purchase 360 shares at $41.67

Scenario 1: Coca Cola

In 2013, he receives $403 in dividends
In 2014, he will receive $440 in dividends
In 2015, he will receive $482 in dividends

In 2016, he will receive $527 in dividends.

In 2017, he will receive $576 in dividends.

In 2018, he will receive $630 in dividends.

In 2019, he will receive $690 in dividends.

In 2020, he will receive $755 in dividends.

In 2021, he will receive $826 in dividends.

In 2022, he will receive $903 in dividends.

And in 2023, he will receive $987 in dividends.

By 2023, the investor has collected $7,219 in cash dividends. Even if Stock A trades at the same valuation in 2023 that it trades today, those shares will be worth $37,223. That same $15,000 worth of shares in 2013 is actually representing $1,676 in annual earnings that is generating $987 in dividends by 2023. In short, the investor would have turned $15,000 investment today into $44,442 in 2023. That is what an excellent productive business can do for you.

Scenario 2: GOLD

What if the investor believes what SundayTimes told him, that gold is the best investment to guard yourself against inflation. So the investor buys $15,000 worth of Gold like 10oz. credit suisse gold bar for $15,046 from a licensed seller. You bought the physical gold and kept it in your safe box for 10 years.

In 2013, the investor doesnt get any dividends, but pay rental for his safety deposit box.

In 2014, he still gets nothing

In 2015, nothingggg

In 2016, Walaueh! Gold dropped?!!?!

In 2017, C'mon leh, where's the money going?

In 2018, Shit, this safety deposit box is getting expensive

In 2019, Ahhh, better check gold price It may go higher

In 2020, Nope there's nothing

In 2021, Gold price is all time high again?! but for how long?

In 2022, Where are my dividends!??? I thought Gold is safe

In 2023, Why did i listen to SundayTimes? Haiya Sell sell...

By 2023, i predict the investor would be so anxious to sell his piece of gold. While the coca-cola investor keeps getting his dividend checks and keeps on rising. The gold investor receives nothing to accompany the passage of time. Hopefully Gold grew into some ultra-rare commodity. When he looks at his little bar of gold in 2023, he sees the exact same gold bar that went in there 10 years ago. Of course minus all the rental fees for the safety box. 

I like how the original author of the article expressed it: Gold is "non-productive asset" where there is no business growth, no profit, no dividends and no interest, only hope that someone is willing to pay more money for that chunk of metal that you paid in 2013. 

It is entirely speculation that Gold will continue to increase at the rate greater than inflation. I call that GAMBLING. After all, gold has no fundamentals; the only hope is that you sell during a time of particularly high inflation or extreme pessimism (which we have been seeing for the past 12 years). If a company like coca-cola keeps doing what it has been doing, investors will be receiving dividend increases of 8-10%. If we have inflation at 3-4%, thats good news for coca-cola investors, price of their soft drinks will also rise, earning them higher profits and passing it onto investors.

I dont want to sound like i am advocating for coca-cola here, you may wish to invest in other companies which have a great history of annual raises in dividends. For example, Kelloggs, Procter and Gamble, Pepsico, Mondelez, Kraft Foods, Colgate-Palmolive, Darlie. You get what i mean, those brands and household products you need single day till you die, those sort of companies.

Again i am not saying Gold is not a good place to park your money during bad times. Gold is great to trade on, just make sure your timing is fairly accurate. See chart below: