BUY AND HOLD STRATEGY TO ENJOY DIVIDENDS

MBABANE - If you want to enjoy the annual and quarter dividends from local companies, buying and holding stock may contribute to a greater share in the dividends.  

A majority of investors in Eswatini, both as individuals and companies, use the Buy and Hold Strategy when buying stock on public listed companies under the Eswatini Stock Exchange (ESE). They seek out undervalued stocks and buy them with the intent to hold onto these positions for months, if not years, with the intent to benefit from the company’s dividends. This was mentioned by ESE Velemseni Tsabedze in an interview with this publication on Friday.

Strategy

He said we have seven enlisted companies under ESE, but most investors use the buy and hold strategy which is beneficial for dividends. Tsabedze said investors come with the mantra of ‘buy low, sell high,’ and seek out undervalued stocks and buy them with the intent to hold onto them for months, if not years. He said this was because investors believed the company’s management and performance supersede all the chaos and flux that is inherent in the market, and in time, the stock would reward them with a large return on their capital. “A buy and hold strategy is a long-term, passive strategy in which investors keep a relatively stable portfolio over time, regardless of short-term fluctuations,” said Tsabedze.

Greystone Partners Limited (GPL) investor Sandziso Malinga, also mentioned that the buy and hold strategy is also favourable for investors without a lot of time to spend researching the market. He said this method is less time-consuming but investors are left out on the growth or loss experienced on a daily basis. Malinga said the biggest drawback of this strategy was the large opportunity cost attached to it. “When you buy and hold something, it means you are tied up in that asset for the long haul. Thus, a buy and holder must have the self-discipline to not chase after other investment opportunities during this holding period,” mentioned Malinga in the interview. He added that the buy and hold strategy was also entirely time-intensive. “Just because you have held the asset for 10 years, does not mean that you are entitled to a large reward for your time and capital invested,” mentioned the expert.

The strategy is also risky because of market crashes, in the event of a correction, leading to a prolonged bear market, buy and hold portfolios can lose most, if not all their gains. “In these circumstances, investors might get overwhelmingly attached to their assets and simply average down in the hopes of a turnaround,” said Malinga. He added that practitioners of  this strategy often did not have to worry about timing the market or basing their decisions on subjective patterns and analysis. Worth mentioning is that Swazi Empowerment Limited (SEL) declared an interim dividend of E38.3 million to ordinary shareholders registered as such in the company’s share register, at the close of business on or before May 20, 2022.

Shareholders

RES Corporation has declared a final dividend of E65 million to ordinary shareholders registered as such in the company’s share register at the close of business on or before May 6, 2022. SBC Limited has declared an interim dividend of E30 million to ordinary shareholders registered as such in the company’s share register at the close of business on or before Friday, February 18, 2022. SEL also declared a final dividend of E23.7 million to ordinary shareholders registered as such in the company’s share register at the close of business on or before February 7, 2022.

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