Dividend Investing: 3578.37% Returns Over 20 Years.

Irving Soh
Irving Soh

What most investors fail to comprehend is that in investing, simple works best. 

What do I mean simple? 

In this article, I selected only stocks with the following factors: 

  • Low Price to sales – you pay the lowest possible amount for each sale the company has
  • Low Price to free cash flow – you pay the lowest possible amount for each dollar in free cash flow the company  has
  • Top 50 percentile of dividend yield – you look for companies with the highest dividend yield
  • Sustainable dividend yield – companies must have sustainable dividends to be paid out over time

And achieved 3578.7% returns over the past 20 years. 

That’s how simple it is. 

The ability for the above factors to produce consistent returns was documented by James P. O’shaughnessy in his book What Works On Wall Street, where the author, a well known quantitative investor (he runs a hedge fund by the way.) did a long term study on the American stock market to identify factors which led to greater returns for investors. 

The criteria used in this strategy were based off that book. 

I wanted to see if what worked in America would have worked in Singapore. Note that the first edition of the book What Works On Wall Street, was published in 1998

The Singapore stock market was formed in 1999

Anyone interested in DIY-ing their own investment strategies would have been able to pick up this book, read it and apply it. 

The success of the strategy is rather astounding. 

Investing $12,000 in the first year (savings of $1,000 a month) and continuing to inject fresh capital of $12,000 every year after for the next 20 years would have grown your capital to a sum of $3,912,771.17 based on the mean returns of the strategy at 21.61%. 

Strategy Results

The strategy was tested over a 20 year period from 1999-2019. 

Total Return 3578.37%
Mean Return 21.61%
Standard Deviation14.91% 

Strategy Breakdown & Criteria

The strategy seeks to grow investor capital through basic compounding. 

The primary rule is to not lose money. 

The secondary rule is to allow consistent dividend collection over the years to compound. That means you can’t eat what you earn in dividends. Everything must be reinvested. 

Given the above rules, I constructed a set of criteria that companies I wish to invest in must pass. 

Stock must be listed in SGX. Stock must not be domiciled in China to reduce the risk of fraud. For those of you who don’t know what I mean, please take some time to go through this wonderful documentary called “The China Hustle”.

  1. Market capitalisation $50m and above. This is to ensure sufficient shares are on the market and ready for purchase. All the analysis in the world will not save you from being unable to invest your money. 
  2. Stock must fall into the bottom 50% of Price to Sales Ratio. This metric measures price against the sales of a company. Basically, the less you pay the better it is. Which is why we only invest in the cheaper half of price to sales ratio. 
  3. Stock must fall into the bottom 50% of Price to Free Cash Flow Ratio. This metric measures price to free cash flow. Free cash flow can be viewed as a company’s true earnings since it’s spare cash a company has after paying for capital expenditures.  
  4. Stock must fall into the top 50% of Dividend Yield paying companies. Since we’re chasing yields, this criteria allows us to target companies that actually fall into the top 50% of dividend yield paying companies. The system does this by ranking all of the stocks and then we buy the top half. 
  5. Stock must have free cash flow yield above dividend yield as of latest year’s financial filings. We do not want unsustainable dividend yields. Ideally, we can smooth this out into 5-10 year time frames. But I’m still figuring out the right way to do this on Bloomberg so give me some time. As of not, we ensure that in the latest financial year, management was not irrational with its money in giving out more than they should to keep shareholders happy only to have a higher chance of delivering the same dividends the following year. I have written extensively on how free cash flow yield can destroy dividend investments in this article. Do read it if you’re interested in yield stocks so that you can understand the significant and power behind free cash flow and dividend yield. 
  6. Portfolio is rebalanced once a year in June. The rebalancing process is simple. Each year, at the same time, we use Bloomberg to provide a list of stocks which has passed our criteria. Stocks that no longer pass the criteria are sold. Stocks that pass the criteria are bought. At the end of the day, we want to have equal positions in each stock. That means if you have $100,000 and 10 stocks to buy into, the end result must be $10,000 in each stock. 

We rebalance the portfolio in June every year for 2 major reasons. 

First, most of the annual reports for companies will be out by June. This allows us to capture all relevant financial information about a company by the time we want to rebalance. Not waiting for an annual report prior to rebalancing is like firing a gun blindly. You might hit, but it’d be a damned lucky shot. While quarterly reports are available, I prefer the fullness of a year’s aggregated data.

Second, rebalancing itself is the simple act of buying low, selling high. Some stocks might have gained in price and some might have dropped in price. Those that continue to make the list are good quality stocks. By redistributing evenly, you sell the stocks that gained in price and buy those that dipped in price. Doing so via ‘rebalancing’ simply means that you won’t be subjecting yourself to investing biases. 

Stocks List for Current Year 

HI-P INTL LTDHIP$1.45 2.76%

Minimum sum to hold 100 shares in each lot is as of the time of writing: 

($1.34 + $1.45 + $0.54 + $0.695 + $1.20 + $36.65 + $0.191 + $4.14 + $0.49 + $0.275 + $1.07 + $0.61) x 100 = $4865. 

The yield of the portfolio above is at 7% for the year. A fairly high number. The beta of the portfolio is at .17 in correlation to the market. 

That means for every $1 that the market drops, your portfolio drops $0.17. And for every $1 the market goes up, your portfolio goes up by $0.17. Note that Beta breaks down in extreme markets.

The good thing is while your capital gains are slightly muted, your yield holds steady most of the time -> which is exactly what we want the portfolio to be doing for us. 

Note that ideally, due to brokerage costs, you want to have about $2,000 allocated per stock. Which puts you at $24,000 total. 

Disclaimer: When you eventually make your millions, neither I nor Dr Wealth can claim a part of it. Naturally, we don’t share your losses too. Be responsible for your own investing decisions. 


No strategy is without criticism. And let it not be said that I have shown you only the sexy part of the strategy. Here, we delve into some of the strategy’s weaknesses. 

Criticism #1 – Industry Overweight 

This is the sector weight of the portfolio. Notice the severe exposure in the Information Technology sector compared to other sectors of Singapore. 


We are heavily exposed to the IT sector, which could be massively painful for us if something crazy were to happen to it.

Extra steps to mitigate such a heavy weighting in IT could be taken if we included other valuations besides price to free cash flow and price to sales which will more fairly reflect other sectors. Or we could just equal weight across stocks AND sectors.

Risk mitigation doesn’t have to be difficult.

For example, free cash flow is derived from operating cash flows less capital expenditure. This can unduly penalise companies with operating cash flows such as utilities and large asset business such as REITs. 

On the other hand, we are clear that we want companies with good free cash flows since that ensures high dividend sustainability and perhaps it should be the natural way to avoid companies with higher or higher than normal capital expenditure when you want steady and consistent dividend yields. 

The debate rages on. 

I’ll cover this in my follow up articles on dividends investing. 

The important thing to remember is that we should not deviate too far from what works – and the strategy works. Both in the US and in Singapore and ACROSS 20 YEARS. 

We should however intervene and NOT use a strategy, IF AND ONLY IF we are certain that our strategy will fail based on geopolitical events.

For example, while our screener can identify key ingredients in a stock that we want, it cannot detect new or government intervention. Such an analysis can only be carried out at the qualitative level. 

So before you invest in stocks shown, I would urge you to take a basic look at the key risks associated with each particular stock and keep an eye out on risks to sectors and industries as a whole. 

Remember that the portfolio rebalances once a year so this is not a Warren Buffett style of investing where you buy and hold forever. 

Criticism #2 – Lack of Qualitative Analysis

Quantitative Analysis is a science. It deals with hard numbers and has defined rules. By rules, I mean it tells you a hard “go” or “no go”. There’s no “maybe” involved. 

In an odd sort of way, it is a comforting thing. Opinions can be subjective but numbers are for sure. You know in a glance whether or not a company even passes muster before you dig further. 

This is why the team here at Dr Wealth has consistently focused on ensuring that we do a numbers-first approach when it comes to investing. 

We want to avoid investor biases and sexy stories tainting our opinions of a stock. 

Qualitative Analysis, however, is a nuanced art. 

You get better at it over time. And the best number to go by is Warren Buffett, who generated about 20% a year in returns for 50 odd years. 

Common ways to improve your skills in this mystic section of the investing world is to arm yourself with knowledge and experience from those who have gone before you.

You can read all of Warren Buffett’s annual letters here. I would consider them compulsory reading for all investors. 

What I have done here in this article is entirely based on Quantitative Analysis. ZERO qualitative analysis was done. 

I did not determine if a company has a moat, like Netlink NBN Trust or SBS Transit, or SMRT before its delisting.  

Nor did I check if a company had a network effect, like Facebook, Instagram, or Whatsapp, all of which Facebook owns. Nor did I check of the companies had a high switching cost, like Oracle or Silverlake. 

I also didn’t check if any of the companies had patents. I did not check their stores and I did not engage their customers to see if the business delighted its consumers. I did not check to see if the companies involved had aggressive accounting policies. 

None of that was done. I would like to gently remind you that the total returns of 3578.37% were still achieved even without all of that. 

However, I would be foolish if I did not tell you that the returns could have been best improved BY a good, seasoned practitioner of Qualitative Analysis, given that he/she is free of irrationality, greed, fear, ignorance, laziness, or a combination of all of them.  

My point is that if you wish to apply some amount of Qualitative analysis, you must first be able to control your emotions and your inherent biases. I’ve documented some of them here so give it a read before you dive into the analysis. 

Also, be aware that good Qualitative Analysis improves returns. Bad Qualitative analysis destroys returns. 

Wrapping Things Up 

I talked previously about how 3 simple factors, price to book ratio, return on common equity, and altman z was able to provide us 1556.10% returns in undervalued stocks over 10 years. 

In that article, I mentioned that strategies need to be tested both over time and over space. In years. And in different geographic markets. 


This is to ensure that the strategy does not overfit local samples and underperforms in overseas markets – which would disqualify us from using a strategy since its dangerous to use something which isn’t theoretically sound. 

In this particular article, the strategy idea was taken from US, where it was already studied to show outperformance over time. 

I have simply replicated the idea here to show that the strategy works in Singapore as well, and over an extended period of time. 

The next 20 years will be exciting to watch and see if the truth bears out. 

Moving forward, I expect dividend investors to have an edge versus growth investors in Singapore for 2 simple reasons. 

Asia is a humongous region with big growth potential, but with highly fragmented religions, politics, and world views. 

Unlike the Chinese and American markets, growth stocks, and their underlying growth businesses face many uphill challenges in trying to grow. 

They have to deal with different preferences from city to city as compared to US or China and thus their growth potential is limited. Whereas in US and China, culture, language, preferences, are mostly homogenised across large cities – thus presenting not much of a challenge once a business has a solid edge over its competitors. 

In that vein, I expect to continue to test for strong dividend strategies with high dividend yields which function as pseudo-growth for investors in Singapore which, 

a) provides for passive income 
b) provides for compounding of wealth over time. 

I will also be delving further and adding qualitative analysis after each quantitative research to further eliminate troubled stocks. 

For example, look at this particular picture. 

Over a 20 year period from 1999-2019, the energy sector suffered horrible rates of returns. 

A shrewd investor would have seen the opening up of the energy markets which precipitated the fall of Hyflux with qualitative analysis and removed stocks with indecent exposure to stiff competition from being included.  

Perhaps more anomalies laid within the model over the past 20 years even before that. I can’t tell without further digging. But dig I shall. 

I look forward to posting further breakthroughs in dividend strategies with all of you. 

For a unique look at growth stocks paired with dividend collection, I wholeheartedly recommend you take a look at the GPAD strategy here. For those of you who wish to retire faster on high, stable, dividend yields, take a look here. 

And finally, for those of you more interested in finding value stocks. You can find our strategy here and case studies here. 

If you’re not interested in reading, and you want to be able to ask questions and get answers instead, you can register for a free seat here