YTL Power has been generous in giving out dividend to its shareholders. My parent have been holding YTL Power share and has been enjoying good dividend payout for decade. Every year, YTL Power pay dividend in form of cash dividend and share dividend (giving extra share unit to shareholders) Since 2004, she paid cash dividend of 10 to 12.50 sen per share every year. Besides cash dividend, she gives out share dividend which, generally accounts of around 5 % yield. Together, the YTL Power is a company famous for 10% yield, where you can earn income which is 10% from the current market value in 1 year. Or put it simple, if u have a 10% yield investment worth RM10, you get RM1 every year. Since 10% is 4 times higher than 2.5% rate of FD, it make the counter a perfect alternative to FD.
Will the company go bankruptcy or go into loss?
This is Uility Business, man!!! This is your safe haven!
Buy and hold strategy is out-dated, but this counter is different story. Utility business is always considered a safe haven to invest in, simply because utility business sell utility that every need no matter the global is in recession or in bullish time. Besides that, the demand for utility is generaly in a uptrend, because the world population is increasing, more people means higher demand of utility. More people need more energy, higher water treatment quantity, higher demand for telecommunicaton services and so on. Global economy is also generally growing, same case here, better demand better utility (energy, water treatment, telco...) demand.
The risk of failure of the business is much more smaller than an airplane crash as long as the pilot of the group is still Francis Yeoh, which has business management style alike his father, Tan Sei Dato' Seri Yeoh Tiong Lay. Where he seek for organic growth of the group and sustainable revenue stream, instead of a sudden one-time leap of profit. "You have to understand your business. We are a regulated business. We do not buy a business to sell it after 2 or 3 years to get the profit. We buy the business and make it the No 1 and let it generate revenue for us. We have license of our business for 100 years, that is why we issued bonds for 30 years, 50 years and we enjoy very low yield for our bond." That might not be the exact phase speaked by Francis Yeoh, but basically that is what he speak in the 2008 AGM that i attended. This show that, Francis Yeoh is not going to risk his business by buying a business that is unable to generate revenue or just want to show how big the company is. Of course, i understand that CEOs may not doing as if what they said, but Francis Yeoh has been showing his great integrity by managing the group as if what he promised. He bought Wessex Water and make it No 1 in UK in term of efficiency, he bought PowerSeraya Limited, Singapore 2nd largest power provider and announced it the day i attend the AGM, and the YTL Power, the first IPP in Malaysia selling power to TNB at the cheapest rate. YTL Power has been there for decades, and its share price is always has a low volatility, it is really a safe haven for investment, is suitable for investors targeting sustainable long-term growth and less volatility.
Safer & Better Dividend gain + Capital Gain
I bought YTL Power last year July at RM 1.77 by converting my FD to this investment. That was the worst time in the market, i have no idea on where to invest. I bought YTL Power as a buy-low strategy because the government just announced the windfall tax on power sector which cause investors' worried on power sector. YTL Power, the least affected-player dropped to below RM 1.70 level. At the moment i bought it i din really try to get in at a lower price, i just have a very simple thought, the dividend-yield is much more higher than FD, i just don't want to hold FD, i just hate the FD paper in my hands. Thus, i parked my capital on YTL Power in hope to get a better-than-FD income and never expect or trying to forecast the share price will go up at that market situation.
Since day 1 owing YTL Power till now i've received 3 times dividend which is 3.75, 4.5 and 3.75 sen respectively. Besides that, i also received a 40 to 1 share dividend which acounts for 2.5% return. If adding in the to-be-pay dividend of 3.75 sen in July, i received a total of
15.75 sen cash dividend per share, which is 8.9% of the price i bought at RM1.77. In addition to the share dividend, the total dividend return in 1 year is 11.4%. In another words, my investment has generated 11.4% income for me, definitely more than 4 times higher than what bank give me. If i didn't convert the investment on July, i'm still waiting July to come to earn that 2.5%.
Is the dividend sustainable?
Yes, i am confident that YTL Power will be continuously giving out dividend for the decades to come as if what she did. In fact, there are people who are much more concern on this, which is the YTL Group and the Yeoh family. YTL Power is the main stream of revenue to the whole YTL Group where 70% percent of YTL Group revenue come from YTL Power. Every dividend declared by YTL Power give a significant impact to the YTL Group Income Sheet and cashflow. You may not take it seriously if YTL Power declare dividend less than the last year by 1 sen, but for the YTL Group, 1 sen is significant enough for the group. I expect YTL Power have better dividend paying power in the coming years as the purchase of PowerSeraya has opened up a new income stream to this utility company.
I believe YTL Power will be giving out dividend more than 13sen from now on since the cashflow stream is larger than before. The strentening of Great British Pound and Australia Dollar will also help strentening the company balance sheet. At the closing price of RM 2.16 on 15 June 09, 13 sen dividend still reflects a 6% dividend yield. Please note that more than 70% of the revenue of YTL Power is contributed from oversee operation, which are from England, Australia, Singapore and Indonesia, thus the position of the currency from those countries have an effect on YTL Power balance sheet and year-end profit.
So, how great is a 10% cash machine? Imagine Mr.A own house worth RM 300k has a rental of RM 900/month which amounts to RM10,800/yr or a 3.6% rental yield. Mr.B own YTL Power stake with RM300k market value, 10% yield amounts an annual income of RM 30,000. Mr.B certainly own a better cash machine than Mr.A.
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