Dear readers, let us take a look at which Straits Times Index (STI) banking stocks is the most attractive now.
We will start off with looking at the Price-to-Book ratios of the three STI banking stocks: DBS stock, OCBC stock and UOB stock to determine which of these stocks are the most undervalued. Without further ado, the price-to-book ratios of these stocks are:
DBS stock:1
UOB stock:0.81
OCBC stock:0.79
As noted from the above, DBS stock is now fully valued and OCBC value is the most under-valued.
Let us know go to the dividend yield of the three banking stocks.
DBS stock:5.42%
OCBC stock:5.11%
UOB stock:4.83%
DBS provides the best dividends among all the three banking stocks here at 5.42%, followed by OCBC and then UOB.
After looking at the above two metrics (Price-to-Book ratios and Dividend Yields), how do we determine which of the three banking stocks are the most attractive?
Well, one way is to calculate the dividend yields of these three stocks assuming each of them is fully valued and has a price-to-book ratio of 1. In this case, we divide the dividend yields of each banking stocks with their price-to-book ratios. And we obtain:
OCBC stock:6.47%
UOB stock:5.96%
DBS stock:5.42%
The above results tell it all. In terms of the normalized dividend yield (based on a fully-valued scenario of each stock), OCBC stock is the most attractive, followed by UOB and DBS stock.
Well, the above methodology is not an exact science to calculating which banking stocks is the most attractive. But it is really a quick back- of- the-hand calculation for investors to strike a balance between undervaluedness and dividend yield where it comes to these three banking stocks.
That’s it for my insights today. I Thank you once again for your support of SG STOCKS INVESTING, your Money and Lifestyle magazine! Connect with me here to follow the daily exciting and useful posts on these two blogs, Thank You for your support!
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