Which stocks to choose for long-term dividends?

Agriseco Research analysis group believes that the strategy of buying stocks with high dividends, healthy finances and industries less affected by economic cycles is appropriate in the context of a sharp decline in the VN-Index and low deposit interest rates.

In an analysis report published on April 19, the analysis team of Agribank Securities Company (Agriseco Research) said that the VN-Index has decreased by nearly 10% since its short-term peak, although the first quarter business results are gradually being announced with strong growth figures. This opens up a more attractive market valuation level.

“With deposit interest rates at very low levels (according to records from major commercial banks, one-year deposit interest rates are fluctuating between 4.3% and 4.9%), the appropriate strategy now is to buy good stocks at reasonable prices to receive cash dividends and benefit from future price increases,” Agriseco Research reported.

According to this analysis group, the three criteria investors should pay attention to when choosing stocks during this period are regular cash dividends, healthy financial situation and businesses operating in highly stable fields.

Agriseco Research recommends 6 stocks in descending order of priority, respectively VEA, SMB, GHC, SED, DHA and PAT.

Specifically, VEA of Vietnam Engine and Agricultural Machinery Corporation is assessed by this analysis group to have abundant cash resources, reflected in deposits accounting for 48% of total assets. "Thanks to stable business cash flow, VEA has paid cash dividends at an attractive rate, ranging from 40-100% over the past 3 years," the report said.

On the stock exchange, VEA closed the weekend trading session at VND35,800, down 0.8% compared to the reference. With more than 1.32 billion shares registered for trading on the UPCoM market, the company's market capitalization is VND47,570 billion.

Chart comparing the market prices of 6 stocks in the portfolio recommended by Agriseco Research.

SMB shares of Saigon - Central Beer Joint Stock Company were ranked second in the selection list by Agriseco. This enterprise is considered to have a safe capital structure due to maintaining a low debt ratio. SMB's plan to pay cash dividends this year is 35%, equivalent to a dividend yield of 9.4%/year. The analysis team believes that this yield is very attractive in the context of one-year bank deposit interest rates only fluctuating between 4.3-4.9%/year as at present.

Another stock listed on the UPCoM is GHC of Gia Lai Hydropower Joint Stock Company. According to Agriseco, last year, GHC's dividend yield was 8.7% and according to the plan to pay a cash dividend of 25%, this year's yield is also 8.7%, nearly double the interest rate of bank deposits.

On the stock exchange, GHC is trading at VND28,500, down 1.4% from the reference price at the end of the week and down about 4% from the one-year peak set in the middle of this month. Average stock liquidity reached 23,000 units per session.

A representative of the Hanoi Stock Exchange in the list suggested by Agriseco Research is SED of Phuong Nam Education Investment and Development Joint Stock Company. SED's dividend yield last year was 7.7% and is expected to remain the same this year. In addition, the company is maintaining a healthy financial situation, with better ability to meet short-term debts.

The remaining two stocks in Agriseco Research's suggested portfolio are DHA of Hoa An Joint Stock Company and PAT of Vietnam Apatite Phosphorus Joint Stock Company with expected dividend yields for this year of 7% and 7.5%, respectively.

The common point of the two companies is that they have maintained attractive dividend rates for many years and have a healthy financial structure. DHA is experiencing strong fluctuations in market price, falling from VND52,500 in early February to VND42,100 as of now. Similarly, PAT's market price also dropped sharply from VND102,000 to VND90,000 after this weekend's trading session.

Source