High Divident Stock in Financial Distress

Topics: Stock market, Dividend yield, Stock Pages: 3 (679 words) Published: March 18, 2011
High cash dividend stocks seem riding out of economic storm: Senao, Chunghwa Telecom, and Taiwan Mobile rose against the overall market. Translation
Stocks with high cash dividend yields are outperforming the overall market in this economic recession. Senao’s cash dividend payout has reached its historical high to NTD4/stock introducing a jump in its stock price. Besides Senao, companies with high dividend payout such as Chunghwa Telecom and Taiwan Mobile are also showing a positive trend in its stock prices.

Analyst pointed out in the time of low interest rate of 1% and poor market return, high dividend yield stocks are viewed as safe vessels in the stock market. Institutional investors seem to stash their cash into stocks with high cash dividend yield. For the past week, foreign investors in Taiwan had kept posting a buying surplus in Chunghwa Telecom with the volume of 15,600 and 9,519. But one thing investors should notice is that the yield of these high dividend yield stock will fall from 7%-8% to 5%-6% due to the poor financial statements.

Figure 1
Source of Data: TEJ Database

Stocks with high cash dividend payout tradition seem to be a safe place to allocate our assets during the time of recession. As we can see in the Figure 1, the quarterly return of the overall stock market never performed better than the three individual stocks mentioned in the article after 2007Q4. Further, the gap between the high cash dividend yield stocks and the overall market has widened ever before during this outbreak of financial tsunami. What is questioning most investors is that will these companies maintain their high cash dividend payout policy during this financial crisis. The possibility for the three companies mentioned in the article to pay out dividend is analyzed below.

Figure 2
Source of Data: TEJ Database

From Figure 2, we can see that Taiwan Mobile may be facing some challenges in distributing its...
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