Best Malaysia Blue Chip Dividend Stock - Best tips of how to select the best stocks

With such uncertainty in the local and global stock market, many investors are seeking for safe haven to invest their hard earned money.

One of the option is to invest your money in stable companies.

The term blue chip stock means that the particular company are typically having huge market capitalization.

It also be able to gives out consistent dividend.

For some companies, it can even continue to grow it's dividend every year.

These are the kind of companies that we are seeking for.

What are the characteristics of a good Malaysia blue chip dividend stock?

With so many stocks to choose from in KLSE, sometimes investor can be confused.

Here are the list that you should watch out for:

1. Strong Monopoly

Most of the time, because of the monopolistic nature of the business, it is hard for competitor to to enter and capture more market share.

We also call this strong economy moat.

It is like a strong castle that is unbeatable.

2. Strong Brand

Because the companies be able to provide good products with strong household brands, the brands stickiness is there.

Almost every household drinks Milo.

Every now and then, you will need to eat some Maggi Mee.

3. Growing Revenue

Only companies that be able to grow its revenue year after year can continue to generate more dividends each year.

When a company continue to launch new products, capture more market share, open more branch; more sales are expected.

4. Strong Profit Margin

Companies that have a higher profit margin over their peers in the same industry will be able to earn more for every products sold.

This just means that more money flow into the company.

5. Growing Earnings and Profit

Revenue is definitely important.

However, not all companies that generates higher revenue are able to generate higher sales.

This is because that companies may spend more on its operating cost, marketing expenses and not paying high debt.

A company that can grow its profit are the true gem.

6. Growth Potential

One of the things that continue to help the company to grow is the ability to be creative and innovative.

When you observe that the company are stagnant in terms of their product offering and lineup, this is a red flag.

A company that stays stagnant will eventually dies.

Do not put money in a stagnant company.

7. Buy at the right price.

A good stock or company can be a bad investment if you buy it at the wrong price.

Price is what you pay, value is what you get.

Do not buy when the company is overvalue.

This is so important.

Many time, amateur did not calculate the intrinsic value of the company before they pull the trigger to buy.

This is a huge mistake that professional investors do not make.

Always calculate the intrinsic value before making any buying decision.

8. Watch out for artificial high dividend yield

Sometime we look at the summary dividend yield number of a stock ticker, and we thought that since it is showing high dividend yield, we buy straight away.

This is a mistake.

You need to understand that dividend yield is using this formula:

Distributable Dividend per share / Share price per share

A high dividend yield number doesn't necessary means that it is a good stock to buy.

Sometimes it is just due to a sudden drop of the share price.

And the drop is can be due to poor fundamental performance of the company.

However, if the drop is temporarily due to market fluctuation caused by panic, this could be a short term effect.

You need to check, whether the drop in share price is due to the poor business performance, or it is just due to short term market sentiment.

If this is due to market sentiment, this can pose a good opportunity to accumulate the shares.

If it is due to poor companies performance, you need to stay away, as the dividend is not sustainable.

9. Understand that nothing is forever permanent.

Even though you may observe that a particular company is performing well currently, there could be also a potential that a company can deteriorate due to various reasons.

It could be due to poor management, reducing market share due to new competitors, poor debt management, poor cost management etc.

Investors need to watch out for any red flag.

It is wise to monitor the performance of the company through its annual report and quarterly report.

10. Good Track Record

A company that has a long good track records means that the company has been able to withstand various crisis.

This means that the company has good risk management.

We know that many businesses are affected during Covid-19.

Some even went bankrupt.

This just means that risk management is not being handled properly.

Properly they have too much inventory.

Or they are unable to pay off their debt.

Or they are not able to pay the salary of their employees.

Or they are not agile enough to be able to make quick decision to handle crisis.

We want to avoid company that are not stable.

We also heard of many companies that even able to grow even faster during the pandemic because they adapt well and fast.

In fact many technology companies has grown by leap and bounds.

Example from BursaMarketplace

I did a screen in Bursamarketplace website, filtering companies that is above RM 1 billion and growing dividend by at least 25%.

Only 2 companies pops up:

• Panasonic Manufacturing (KLSE: PANAMY) - dividend yield of 6.32%
• Top Glove (KLSE: TOPGLOV)  - dividend yield of 9.30%

It seems that the above stocks are quite a well known brands.

Investor can start to do more research on the stock above.

Conclusion

The above are some key characteristics of a good and strong blue chip companies that be able to gives out consistent dividend.

Every investors need to watch out for those lists.

Many time, you need to read the financial report to understand more.

Want to learn from the best of how Warren Buffet invest his money in blue chip companies?

Watch the videos below:

Happy Investing! 😉