OFF THE WALL: Purely sentimental: Investing in the Philippine stock market

Philippine priest offers mass for traders at the PSE trading floor

Philippine priest offers mass for traders at the PSE trading floor

By Rene Pastor

I have a small online account to invest in the Philippine Stock Exchange (PSE).

It is far smaller than my IRA in the United States. Sometimes, I wonder why I keep it open. The only answer I can come up with is sentimental value. It is the only way I can own a portion of the country where I spent the first 35 years of my life.

There’s only one problem with owning stocks in the PSE. The return on investment is simply not good. Companies which earn billions of pesos in profits are downright stingy when it comes to dividends.

Take Ayala Land. It is one of the biggest, if not the most profitable property conglomerate in the Philippines. The dividend per share is all of 0.14348287 centavos per share or $0.003. In U.S. terms, it is three-tenths of a penny.

Another Ayala company, BPI (Bank of the Philippine Islands), comes in a little better in its dividends at 90 centavos/share. Its net income in the first six months of 2013 went up nearly 30 percent to 12 billion pesos.

Metropolitan Bank, the top rival of BPI, handed out a dividend of 1.00 peso per share. Its net income for the first half of 2013 more than doubled to 18.1 billion pesos. Both banks are on track for a record year. But unless you own tens of thousands of shares of each, the return for the small, retail investor is downright niggardly.

Worse, there is no dividend reinvestment program (DRIP) for any of those stocks which are already the blue chip firms in the PSE.

One time, I wrote to San Miguel, which is just about the biggest company in the Philippines with interests ranging from food to beer to mining, about them having a DRIP. They said it is something they are thinking about doing.
For now though, no DRIP. Such a program is standard in the United States. So even if your dividend is small, a DRIP would allow you to buy more stocks of the same company and grow your portfolio. Can you imagine how big your investment would be if you keep buying stock of the same firm for 10 or even 20 years?

San Miguel is about the only Philippine company that pays dividends more than two times a year, paying it out five times in a year. BPI hands it out twice a year and they sometimes throw in a third special dividend.

The only way to earn a decent living for small investors from those three companies is to pray that they declare a stock dividend.

Metro Bank declared a 30 percent stock dividend that was paid out on September 16. If you own 500 shares of Metro Bank, the dividend would be 150 shares and since they are worth about 90 pesos a share, that is worth around 13,500 pesos.

Despite all the frustration about investing in the PSE, I am keeping my account open. In fact, I opened two new positions in the PSE by buying stocks of two companies this week.

One is Manila Water Co., a utility owned by Ayala so at least the management part of the firm is good. The stock was trading near its 52-week low of 25 pesos a share and demand can only grow as the population in the Philippine capital expands.

The other firm is Pepsi Cola Products Philippines, whose mother company is Pepsi Co. in the U.S. The company is aggressively expanding its network in the Philippines, a country that is already the leading consumer of U.S. food and beverage products in Southeast Asia. It is a share that is trading near its 52-week low of 4.50 pesos a share.

You have an expanding population in a country whose economy is growing 7-8 percent with an enormous appetite for American food and soft drinks.

The rationale for buying these firms is really simple. Well-run companies with good products do not stay for long at 52-week lows.


‘Off the Wall’ is a weekly column on the stock market. The comments expressed here are the author’s personal views and are not meant to recommend the buying or selling of stocks.



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