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My view about Netlink NBN Trust (CJLU.SI)
14 Nov 2022 (752 views)  

My friend asked for my views about this stock. It pays an attractive dividend yield of 5.85%.

I studied the financials of this stock at the Yahoo Finance website. Link

I extracted the financials from the two tabs called - Summary and Financials.  They are shown below. 

1.  Netlink earns $0.02 per share. This has been steady for the past 4 years. 
2.  They currently pay a dividend of $0.05 per share.

How is it possible for them to pay a dividend that is higher than what they earn? I suspect that $0.03 comes from depreciation. The assets are being depreciated over 30 years. Instead of reinvesting the depreciation into replacing the infrastructure, the company is using the depreciation to return the money to the unit holders. 

This means that at the end of 30 years, the infrastructure is totally useless. The value of the company at that time will probably be nil. 

The unit holders should look at the return as being $0.02 divident and $0.03 as return of capital. The dividend of $0.02 translates into a dividend yield of 2.3% (based on the current unit price of $0.88.

If my interpretation is correct, the unit holder can expect the unit price to fall by $0.03 every year, reflecting the return of capital. 

I find this stock to be not attractive. 

Note: I am giving a personal view. I am not giving investment advice. 

Tan Kin Lian
 


My view about Netlink NBN Trust (CJLU.SI)
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My friend asked for my views about this stock. It pays an attractive dividend yield of 5.85%.

I studied the financials of this stock at the Yahoo Finance website. Link

I extracted the financials from the two tabs called - Summary and Financials.  They are shown below. 

1.  Netlink earns $0.02 per share. This has been steady for the past 4 years. 
2.  They currently pay a dividend of $0.05 per share.

How is it possible for them to pay a dividend that is higher than what they earn? I suspect that $0.03 comes from depreciation. The assets are being depreciated over 30 years. Instead of reinvesting the depreciation into replacing the infrastructure, the company is using the depreciation to return the money to the unit holders. 

This means that at the end of 30 years, the infrastructure is totally useless. The value of the company at that time will probably be nil. 

The unit holders should look at the return as being $0.02 divident and $0.03 as return of capital. The dividend of $0.02 translates into a dividend yield of 2.3% (based on the current unit price of $0.88.

If my interpretation is correct, the unit holder can expect the unit price to fall by $0.03 every year, reflecting the return of capital. 

I find this stock to be not attractive. 

Note: I am giving a personal view. I am not giving investment advice. 

Tan Kin Lian