Tuesday, September 13, 2016

I set my buying price and selling price for DBS Group Holdings Ltd

Since I have the habit of saving up my money for a whole year, and then use the savings to buy one single stock, I am very careful with my stock selection.

I will monitor a few stocks, and then set a buying and selling price.

At the moment, one of the stocks I am monitoring is DBS Group Holdings Ltd.

DBS Group Holdings Ltd is a banking stock.  It is one of the component stocks of Straits Times Index (STI).

After trying for years to understand the factors impacting the banking business, and the factors affecting the share price, I come to the conclusion that everything under the sun has an impact on banking system.

The government has impact on banking.  The US Fed has impact on banking because they set the interest rate.

The oil price has an impact on banking, because it affects the oil and gas sector, the transport sector, and international trade.  Banks earn from international trade.

Even contagious disease like SARS has an impact on banking, since it has effect on healthcare cost, and tourism.

Since everything has an impact on banking, I give up trying to analyze the banking sector. 

As long as the dividend payout is stable, that will be my guide for setting a buying price and selling price.

My dividend target for DBS Group Holdings Ltd is 5%.

DBS pays out dividends twice a year.  Since 2015, the dividend is 60 cents a year, payable in June/July and September/October.

The dividend ex-dates are in May and August of the year.

Since I want a 5% return in dividend, my buying price must be $12 or less.  $0.60 divided by $12 is 5%.

At the time of writing, the price is more than $15.

I will have to wait very patiently for the price to fall to $12 and below. 

Since I have to save up for a year to buy shares, waiting is not a problem.

The next step is to set a selling price.

I will sell when the dividend return based on current share price is 3% or less.   That means the selling price is $20.

$0.60 over $20 is 3%. 

So now I have a set buying price and selling price for DBS Group Holdings Ltd. 

I will buy when DBS share price is $12 or less and I will sell when DBS share price is $20 or more.

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