BIZ BUZZ: ‘Tsupiteros’ out, dividend play in

If you think that the local stock market situation couldn’t get any worse than the bloodbath seen during the COVID-19 lockdowns—when massive earnings destruction was inevitable—think again.

The Philippine Stock Exchange Index (PSEi) is now trading at just 8.9 times expected earnings of local blue chips. This price-to-earnings multiple is the poorest we’ve seen in the last 10 years, and even lower than its March 2020 or pandemic low of 9.4 times earnings, online COL Financial estimated.

Growth prospects have definitely dimmed amid the flood-gate scandal. The peso is likewise weakening and globally, fears of an artificial intelligence bubble are rising.

“This market is not for traders, but it is attractive to long-term investors,” COL said in a research note.

It’s also during these dire market conditions that investors are advised to pick up fundamentally sound stocks that offer attractive dividend yields.

“The income they provide makes it easier for investors to stay patient while their prices are depressed. These stocks should also become more attractive as rates fall and could pave the way for price recovery once sentiment improves,” COL said.

Other fund management houses have likewise recommended embracing such a dividend play.

Year to date, the best performing mutual fund of Philequity Management Inc. across all time horizons, for instance, is its dividend fund.

“For those who still want to be exposed to equities, this is the way to go: buy the dividend yield strategies. We have shown that over time, this can outperform, especially when the broad market is not doing very well,” Philequity vice president Miguel Agarao said in an investors’ briefing.

See Also

Benign October inflation raises hopes for more rate cuts

Looking at the performance of equity-based unit investment trust funds (UITFs) year to date—excluding those with assets invested overseas, like Manulife Asia Best Select Equity Fund, which delivered a fantastic return of 28 to 30 percent—dividend funds mostly outperformed.

The best performer is the high-dividend equity fund of Landbank, with a return of 6.9577 percent.

The dividend funds of BPI Wealth (+1.87 percent), BDO (+1.24 percent) and RCBC Trust (+0.87 percent) showed modest gains but managed to defy the 10.9-percent slide of the PSEi.

Meanwhile, among actively-managed equity UITFs, those held by AB Capital (+1.47 percent) and AUB (+0.32 percent) also avoided the bloodbath.