Chia asked 10 months ago
For dividend stocks, do we place emphasis on return on equity and return on assets.
I was looking at Hang lung properties and their return on equity and return on assets is only 2%.
For return on assets, do we use net assets or total assets?
For return on equity, do we include retained earnings or reserves in the calculation of shareholder equity?
is the low ROE and ROA something we should be concerned about for a dividend stock? see https://www.hanglung.com/HLPAnnualReport2023/pdf/en/hlp_ar2023_e.pdf thank you
is the low ROE and ROA something we should be concerned about for a dividend stock? see https://www.hanglung.com/HLPAnnualReport2023/pdf/en/hlp_ar2023_e.pdf thank you
1 Answers
Rusmin Ang Staff answered 10 months ago
Hi Chia,
Similar to REITs, Hang Lung is a capital intensive business where they own largely investment properties. So when we measure their ROA/ROE, their return will be low single digit. It is quite common for capital intensive business to have low return on investment and that's why they always leverage to amplify the return. That's why we never measure their ROE/ROA.
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