Sunday, May 23, 2010

Great dividend Yield Company - Amway(RM 7.42)

It has been a while I did not talk any company in specific. Don't get me wrong that I'm turning bullish. It has nothing to do with bullish or bearish view, just plain opinion on this company.

There were a few companies able to swim against the tide even during the last great panic in 2008/2009. Amway is one them.

There is only one reason if we want to buy Amway – dividend. Amway is a multi-level company. This logo defines their offerings very clearly – home, beauty and health. Just look around you, there is a good chance that you can find people using Amway’s products. Amway is a great brand. This will ensure a repeat sale even though is a bit cyclical-moving along with the general economy. I’m not going to repeat the next standard script, improving economy, stronger Ringgit will boost their bottom line, da…..da…..daa……. If we smooth out over a few years, we should expect them to earn around RM 85 million profits, and all of them will be returned to shareholders.

These two are great charts.

You will notice that they have been paying dividend consistenly -- at least 100% of their earnings. Any improvement in the business will certainly send the money back to our piggy banks. Dividend yield is between 6 – 7%, or net of 4 to 5.25%.

What is striking in the second chart is they pay quarterly dividend and particularly higher in Quarter 3. Holding them through the end of the year, will beat FD rate.

The only issue is growth but they are trying to resolve them by trying to open up more branches – 8 so far and 3 more in the pipeline. Each of them will cost about 4 million. May cut a bit on the cash flow. I’m hopeful expansion will generate higher future sales equal to higher dividend.

Disclosure: No position.

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