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ComfortDelgro or SIA? Special dividend!

Saturday, August 13, 2022

 This has been a crazy week in real life while virtual life has been somewhat placid.

Still waiting for Genshin Impact's new nation with the element of Dendro to go live and also waiting for Neverwinter's new mod.

It is partly my fault for going through new gaming content as quickly as I do but I am a full time gamer first and a retiree second.

What to do?

So, I have been playing RISK a lot online recently!

Yes, I was surprised to find that I could play RISK online with people around the world and it has been pretty amazing.

Anyway, with real life matters demanding a lot more attention from me this week, I didn't have a lot of time to read the news.

Catching up.




Today, I am happy to read that ComfortDelgro is recovering nicely as expected.

First half profit is up significantly and even the taxi business reported an increase of 18% in profit.

There was a one off gain from a sale of asset and the company is going to pass the gain from the sale to shareholders.

What I like about this is that it will be a standard practice from now on.

An interim DPS of 2.85c and a special DPS of 1.41c were declared.


ComfortDelGro chairman Lim Jit Poh said: 

"The group is in a fortunate position to have a strong cash flow and be in a net cash position. As such, we do not have any problem funding our dividend payouts internally. 

"With the exceptional gain from the sale of the Alperton property in London, we have decided to pass on the net gain from that sale to our shareholders. This is something we will continue to do going forward when we make extraordinary gains and have no urgent need of the proceeds."





This reminds me of the reason why I bought ST Engineering donkey years ago.

ST Engineering, flushed with cash, didn't need to retain any of their earnings and simply paid all their earnings to shareholders as dividends, year after year.

See: 

Some people ask me if I would consider investing in SIA now that air travel is improving and we could see traffic returning to pre pandemic levels in the next couple of years.

It is good to see that things are improving but it is also important to remind ourselves that SIA is heavily in debt and it will take them more time to fully recover.

How much time?

Definitely not out of the woods yet and SIA still has plenty to be concerned about.

Air traffic might return to pre pandemic level in the next couple of years but for SIA to fully recover, I suspect it would take many more years.




Of course, if something untoward happens and the economy plunges again, would we rather be investing in businesses that have strong balance sheets than those that do not?

Peace of mind is priceless.

With past crashes, not many people could tell what would be their triggers.

With all that is going on in the world recently, it is not as hard to see what could trigger the next big crash.

Troubled is the world today.

Still, it would be silly to do a Chicken Little and just sit on cash.

I am staying invested in bona fide income producing businesses and preferably those with strong balance sheets.

I am also keeping some powder dry just in case and, of course, I have an ultimate safety net, my CPF savings.

In my retirement, I am not going to be too adventurous.




10 comments:

caelitus said...

Hooray for CDG. Returning some of public transportation expenditure back to us!

AK71 said...

Hi caelitus,

You like.

I also like. :D

garudadri said...

Dear AK
As a long suffering shareholder of CDG, it was nice to see this report. However, there are still considerable challenges this company will face. Not just the local transport and taxi divisions but also the UK and Aussie operations- foreign exchange headwinds with depreciating GBP and AUD
I am not hopeful that the share price will go back to the “glory days “ of 2.50/3.00 with nice dividends as bonus
This is my worst performer in my SG portfolio
Regards
Garudadri

AK71 said...

Hi Garudadri,

As an investor for income, I am more interested in the income generating ability of the business and their willingness to reward shareholders.

Over time, if earnings improve, dividends should follow.

Whether share price improves or not is secondary to me since I rarely sell businesses which generate a respectable income for me.

Share prices matter more to traders.

Good income generating assets have more often than not been removed from my portfolio against my wishes. ;p

As long as I feel that I have paid a fair price for the business, I am happy enough.

keng said...

AK didn't just pay a fair price, he bought at distressed price more often than not :P

I have been trying to do that for years but fomo always gets the better of me.

Hope to do well in the next couple of years!

AK71 said...

Hi keng,

Yes, you are right to say "more often than not" because surely it isn't all the time that I bought at distressed prices. (TmT)

For ComfortDelgro, I bought mostly at $2 and $1.90 a share way back in 2017 when I did an incomplete analysis of the business.

I thought those were fair prices to pay.

Reference:
ComfortDelgro: An incomplete analysis.

Mr. Market obviously feels differently about ComfortDelgro but it doesn't bother me (much.) ;p

I would rather invest in money making ComfortDelgro over money burning GRAB which Mr. Market seemed to like a lot more up until recently. ;p

I added to my investment in ComfortDelgro during the pandemic induced bear market and also recently as I thought Mr. Market was feeling overly pessimistic about the business.

A company's operating earnings is what impacts its ability to pay dividends, not its stock price.

A company's balance sheet is what determines if it is able to weather downturns in the economy, again, not its stock price.

Of course, as an investor for income, I want to see that the company is willing to share the fruits with its investors.

Focus on fundamentals and the value a company offers when we are investing for income.

Only human, sometimes, I stray from this and it is still something I remind myself of from time to time. :)

SgFire said...

Hi Ak

Interesting thinking behind your investment strategy, kambatte!

AK71 said...

Hi SgFire,

It is about getting rich slow and trying not to lose (too much) money in the process. ;p

If I am right 6 times out of 10, I am happy enough. :)

Gambatte! :D

Reference:
Wait for a big crash to pick our durians?

1 said...

Hi ak
What is the effect of cdg getting kicked out of sti?? I know it has no material impact on its business but will tis not put a cap on cdg share price?? What is ur take on tis tyvm..

AK71 said...

Hi 1,

Like you said, being removed from the STI has no impact on the fundamentals of the business.

I invest in ComfortDelgro for income and as long as it still generates a meaningful income for me, I will stay invested.

In fact, if its share price should decline sharply, I would probably buy more as I would be getting more value for my money then.

You might want to scroll up and see my reply to Keng on 14 Aug which is probably relevant to your question too. :)


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