Dividend Stock valuation - Dividend Machines by The Fifth Person

Q&A › Category: Dividend Stocks › Dividend Stock valuation

YT Lim asked 2 years ago

Hi Rusmin, Victor & team, my first post here. Thanks for the the awesome courses. I'm a member to both Alpha Quadrants & Dividend Machines.
I have taken Alpha Quadrant first, and now going through DivMachines lessons. I noticed the way you value Div stocks is quite different from the way you do it on Alpha Quadrant.

I got 2 questions:

When one evaluates the dividend stocks, is it also necessary to apply Alpha Quadrant's valuation methods such as financial analysis & checklist like the ones on your excel sheet templates. Whether the answer is yes or no, can you elaborate on it.
I'm doing the div growth valuation on Venture V03.SI. So far it didn't pass the Debt Servicing Ratio because Venture has the debt ratio of 138% which is way above the 30% threshold. I'm not very sure if I get the calculation correct.

1 Answers

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Rusmin Ang Staff answered 2 years ago

Hi YT,

You can use AQ valuation method like PE, PCF on dividend stocks since they tend to report consistent earnings and cashflow over the years. You can also use the AQ financial analysis and checklist to analyse them but you can't use it for bank and REIT since they are very different breed of animal. For DM, the method is a lot more simplified since we mostly use PB and yield as valuation method but you can definitely use AQ knowledge to enhance your analysis.

Referring to Page 112, Venture Corp has net interest income actually. So debt to servicing ratio is a pass!

https://venture.listedcompany.com/misc/ar2023/VentureCorporation2023AnnualReport.pdf

You can read more about this topic below. Recently someone just asked about this.

https://dividendmachines.com/question/debt-servicing-ratio-for-sia/#answer-24149

YT Lim replied 2 years ago

Thanks Rusmin for your answer with links provided.
I noticed you get the interest income from annual reports. Does it matter if we use quarterly or annual report? Is it more accurate to refer to the annual report since we get the overview the full financial year.