On 11 Dec 2009, Popular Holdings reported their quarterly results and declared dividend of 1 cent per share. The current price of Popular share is $0.18. If you calculate at this price you are already earning 5.5% initially.
Is the yield really 5.5%? Let’s do our sums now.
John purchased 50,000 Popular shares at $0.18. Including commission and clearing fees. He has incurred a cost of $31.50 for commission and other fees. If he sells the 50,000 shares at the same price, then he has incurred another $31.50 for commission and other fees. In total, there is an administrative cost of $63.
Now let's do the math. The dividend earned is $500. After deducting $63, the actual dividend earned is $437. Hence, the actual returns is only 4.86%, instead of 5.5%. Anyway, 4.86% returns already beat CPF interest and all the other banks' interest.
However, fear not...
The stock prices do change, up or down, I do not know. All I know is to follow Rule #1, do not lose money.
Remember, James bought 50,000 popular shares at $0.18. If the price goes up by $0.01, he will earn another $500. After getting the dividend, if he sells the shares at $0.19, his total returns is $935, not only $437. Therefore the returns is actually 10.4%.
Think about it....
You can access http://www.popular.com.sg/ to get their financial infomation.