What is your definition of cash-rich?

What is your definition of cash-rich?

What is the meaning of Cash-rich? According to a Google search which I did, it gives several examples such as  (1) having a large amount of money available to spend (2) cash-rich companies are rushing to build their portfolios.

Well, are you confused? I won't be surprised if you are because yours truly also struggled to come out to term with the more truly definition of cash-rich meaning.

When I first came to know this word Cash-rich in my younger days (when I was beginning to learn English), my first impression was that it is something like someone loaded with spare cash (whatever amount in hand) and free to spend as he wishes without the worry of any debts to pay.

Well, it seems like I am not exactly right if my definition of cash-rich is like what I thought as mentioned above.

A recent article of Focus Malaysia weekly featured a story of cash-rich companies in Malaysia. My initial thoughts were that those mentioned companies are cash-rich companies sitting on hoards of cash with no debts or all or small debts to pay.

How wrong I was when I scrolled down and discovered that many of those mentioned cash-rich companies actually carry long-term large debts (many of their debts are several times more than their cash in hand).

Sorry, I might be very wrong or naive about this definition, but can we truly classified these types of companies carrying larger debts than their current cash in hand as cash-rich?

Let us take a few examples to share. Oriental Holdings has cash RM 2.2 billion while its total debt is RM 1.3 billion. Definitely Oriental Holdings is truly cash rich if assuming it pays off its debt and will still has RM 900 million.

But on the other hand, another company Bumi Armada has cash RM 2.1 billion, but its debts are as high as RM 9.8 billion. Truly its financial position is not as comfortable as Oriental Holdings.

Of course, I am only sharing my views from the cash position and I did not use its available assets or its business to take into consideration. We should also take note that there are many companies carrying bigger debts than its cash in hand holding on to several unrealised assets like land or its valuable cash generating business.

Anyway, I am here to express my thoughts on this cash-rich words. A random survey with a few of my elderly friends about the true meaning of cash-rich held similar views as mine. Most of them have this same perception that cash-rich definition is one who has spare cash in hand without a single debt or minor debts.

Take another interest example of a person instead of a company. Assuming a 50 year old man has cash RM 100,000.00 + another RM100,000.00 in his EPF account, he will be holding a total of RM200,00.00. But he still has another RM300,000.00 housing loan to settle. His current property is worth RM500,000.00 at market value. Can we consider him as cash-rich or not?

But if we take into account into his overall financial statement including his house's (asset) market value of RM 500,000.00, then he should be in a positive position of RM 400,000.00 (House = RM 500,000.00 + RM 100,000.00 cash in hand + RM 100,000.00 EPF = RM 700,000.00 minus RM 300,000.00 - Housing Loan = RM 400,00.00).

But this is taken into account his house is being sold for RM 500,000.00. Then again, one is unlikely to sell his property because he needs to stay and besides, if he sells off his property, where is he going to stay? Do you think he will buy another similar property at similar price again?

Back to most of us, I think the most wonderful definition of cash-rich for an individual person would be having a few hundreds thousand or a one or two millions in hands (let us not talk about the super rich) and virtually no housing / children's education / car loans to pay at all.

I think there are not many of the average Joe who can claim to be in this wonderful cash-rich position. If you are one of these rather semi elite group, definitely you are considered truly cash-rich in my eyes.

Congratulations if you are one of these elite group reading this blog now. Give yourself a pat for having well done in your career or business. It is not easy to achieve even to be in this semi elite status.

But then again, while feeling cash-rich is a wonderful feeling, there is another ........-rich position that is even more important than having plenty of money.

Do you know what is it? By now, if you still can't figure out the word, then check with all those very sick or unhealthy people and ask which they would choose if God gives them a second chance with this question : Would you choose "health-rich" or "cash-rich"?

Harrisons - A stable high dividend yield stock

Harrisons - A stable high

dividend yield stock

A good third quarter of 2016 had just gone by like that without us realising time is seriously moving faster than we actually thought so.

Again, this month will be the beginning of the reporting session for most companies to announce their 3rd Quarterly results. But how have the first half session gone for most of the sectors? According to several reports, most didn't do well with a few shining ones.

But one sector that has been doing pretty well is the Trading House Division and the three main players are : DKSH Holdings (M) Bhd, Harrisons Holdings (M) Bhd and Yee Lee Corporation Bhd.

These three companies are agencies that are mainly involved in distribution of products produced by all those multinationals companies in Malaysia and also from other parts of the world.

A good look at these three's companies half yearly reports suggested that they should continue to do well and steady for the rest of the year.

DKSH

The bigger brother of the three, DKSH reported an eps of 7.15 and 12.95 for Qtr 1 and Qtr 2 respectively totalling 20.1 sen. On an annualised basis would give it an eps 40.2 sen which will be significantly higher than 2015's earning of 23.35 sen.

Harrisons

I considered Harrisons as the middle brother compared to DKSH and Yee Lee as the youngest brother. Anyway Harrisons reported an eps of 8.39 and 7.66 for Qtr 1 and Qtr 2 respectively totalling 16.05 sen. On an annualised basis would give it an eps of 32.1 sen which will be significantly higher than 2015's earning of 22.87 sen.

Yee Lee

Yee Lee reported an eps of 6.23 and 5.45 for Qtr 1 and Qtr 2 respectively totalling 11.68 sen. On an annualised basis would give it an eps of 23.36 sen which will be significantly higher than 2015's earning of 17.56 sen.

Yours truly chooses to use the annualised way as a comparison although it remains to be seen how they will fare in the last two quarters. So it is up to you to choose to your own way of comparison if you want to have a good judgement of how they will fare in 2016.

Regular dividends paying stocks

As a matter of fact, I would categorised these three as good defensive stocks that long term investors who have strong holding power could consider adding them to your portfolios. Apart from their rather consistent earnings most of the time (of course there might be exception years of inconsistent expected profits), their share prices also do not swing wildly very often at the slightest of any major crisis happening in the world.

One of the good attractions of these three stocks are their remarkable good records of consistent dividends payments to shareholders over the years. Of the three, I personally feel it is the East Malaysia Kingpins - Harrisons that is the also the King of Dividends Paymaster compared to DKSH and Yee Lee.

Dividends since 2007

Now let us track back to year 2007 until this year for all the three companies' total dividends individually. These figures are obtained from website which should be correct figures. Since 2007, the total dividends from DKSH is RM658.00. Yee Lee's dividends is roughly RM500.00. (But one must take note that Yee Lee gave out a bonus of 2 for 5 in 2010, so by right its dividends should be more than RM340.00 - assuming without the bonus issue).

But take a look at Harrisons' dividends which is a remarkable RM1,795.00! Of course  this included a special bumper dividend of RM500 paid in 2011. Excluding this special dividend, the figure is still RM1,295.00 which is still more than the total combined of its two brothers.

So for good dividends lovers, it is a no brain winner to picking up which trading house shares offers you a higher percentage of dividends payout.

I have been fortunate and lucky enough to be one of the earliest birds to get a good cherry bite on Harrisons shares. Regular readers would remember how I shared on April 11, 2014 : Harrisons - The Kingpin of East Malaysia. It was in that blog that I revealed my 10,000 shares bought in 2004 at RM1.36 were effectively free shares (when one counted the total dividends received since 2004 until 2016). The total amount is RM19,850.00. Minus out my original capital of RM13,500.00 and this would give me a clean clear cut of cash profit of RM6,350.00 in safe pocket plus the current 10,000 free shares worth easily more than RM30,000.00.

Furthermore, on April 4, 2014, I bought another 3,000 shares of Harrisons at RM3.08 and to date, received dividends RM1,350.00 (RM150 dividends per share paid in 2014, 2015 and 2016 x 3,000 shares).

In view of its good dividends history, I have decided to buy more again of Harrisons shares to add into my Kassim's Basket of Defensive Stocks.

Buying 2,000 shares

of Harrisons

on October 4, 2016

at RM3.15

So as of today, my total holdings of Harrisons shares are 15,000. I am not expecting any swift major movements of its share price. In fact, its share price is likely to remain the same for some times to come.

But then again, when its dividends of 15 sen per share (consistently since the last four years) is easily as high as 4.7% high which currently no bank can match, conservative dividends investors should take a look at this stock if it is worth adding to their portfolios.

Yours truly just did.