My Stock Selection Criterias

Stock selection criteria varies from person to person. You need time to build your own stock selection criterias. I spent few years to have my stock selection criterias firmed.
Please use this as your own reference ONLY.

MY STOCK SELECTION CRITERIAS
1) Annual Dividend Yield is more than 6% for past 3 years
2) Revenue & Profit have been growing up in past 3 years
3) ROE more than 10%
4) Preferably debt free

Yes, dividend yield is my first concern as Dividend doesn't lie because it is the real cash to be paid to every shareholder. Why 6%? This is because we should have the potential return at least double of the fix deposit since we put our money in risk.

Do you want to receive the same dividend amount every year? The answer of course NO. So, the criteria #2 play a very important role here. When the company is making more and more money, i.e. revenue & profit are going up. The chance of getting higher dividend amount is also higher. Otherwise, you will receive the same amount every year if the business of the company cannot grow or even going down.

ROE is the key for us to evaluate how effective the management of the company utilise the available asset of the company.

ROE = Net Profit of the financial year / Total Equity

10% is good enough for me since i'm more focus on the dividend income.

The last one is about the debt level of the company. I prefer zero debt company which mean company has more cash than the debt including the long term & short term debt. Yes, i do agree that debt can maximise the return of the business, but it will be a burden for a company if it is over leverage the debt. It will be good if you can understand how a company goes bankrupt or become a PN7 company.

Happy investing!