10 trading tips to keep you sane and solvent

Extreme market volatility over the past year and the agony of watching the market fall off a cliff while pension managers are out playing golf has driven more and more people into short-term trading.

Trading follows a different methodology from investing: you are looking for short-term movements and speculating on price falls as well as rises. Investing entails looking for value and taking a longer-term view.

Here are 10 trading tips that have stood the test of time.

1. Knowledge is king. Have an economic calendar, and a company reporting and dividend schedule to hand. Devour the business pages and read the odd trading book. Have a financial television channel on, but avoid information overload.

BoP declares 32.5pc dividend

The board of directors of Bank of Punjab in a meeting on Wednesday announced stock dividend of 32.50 per cent for its shareholders for the year 2006 as the bank earned a pre-tax profit of Rs4.8 billion.

In the meeting, audited accounts were presented to the board, which approved it. The accounts revealed that the bank earned 51 per cent higher profit in 2006 compared to 2005.

It recorded after-tax profit of Rs3.8 billion, which was 62 per cent higher than 2005. Similarly, earning per share was Rs13.14 against Rs8.13 recorded a year earlier.

NBP announces 40pc dividend

The National Bank of Pakistan (NBP) on Monday announced a cash dividend of 40 per cent (Rs4 per share) and 15 per cent bonus shares after posting a record pre-tax profit of Rs26.3 billion during 2006.

According to an announcement, the board of directors of NBP which approved the annual accounts for the year ending December 31, 2006 also approved the cash payment of Rs4 on each share. The net profit surged by 38 per cent rising from Rs12.7 billion in 2005 to Rs17 billion in 2006. The Earning Per Share jumped by 34 per cent to Rs24.01 in the period under review.

JS Abamco Dividend Announced

JS Abamco (formerly Abamco Limited) has announced total cash dividend of Rs888.806 million for its three closed-end and one open-end mutual funds. Accordingly, the Board of Directors of the Company approved cash dividend at Re1 per unit for UTP – Large Cap Fund; Rs1.275 per unit for UTP – Growth Fund; Rs7.5 per unit for UTP – A30+ and Re1 per unit for BSJS Balanced Fund. JS Abamco Ltd enjoys an asset manager rating of ‘AM2+’, which is the highest rating ever received by any asset manager in Pakistan and reflects its leadership and strength in the asset management sector. Moreover, PACRA has assigned 5-star ratings for superior performance to all eligible open-end funds.

OGDCL declares 17.5pc dividend

The Board of Directors of Oil and Gas Development Company Limited (OGDCL) on Wednesday announced second interim cash dividend at Rs1.75 per share (ie 17.50 per cent) for the second quarter ended December 31, 2006. This is in addition to the first interim dividend of Rs1.75 per share already declared during the current financial year.

The net income of the company for the first half (July-December 2006), stood at Rs23.1 billion (EPS Rs5.37) compared to Rs20.3 billion (EPS Rs4.72) previously. This represents a growth of 14 per cent in bottom-line.

Nishat Mills gives no dividend

Nishat Mills announced no payouts to the shareholders despite depicting a growth of eight per cent in its net income that surged to Rs875 million (EPS: Rs5.48) for the current fiscal year’s first half ending December 31, 2006 from Rs811 million (EPS: Rs5.08) registered during the same period last year.

Although the overall textile sector exports exhibited a sluggish trend Nishat Mills exports continued to grow consistently posting an eight per cent growth over the corresponding period last year, said Farhan Aziz of JS Research.

KAPCO announces 30pc dividend

Kot Addu Power Company (KAPCO) managed to announce an interim cash dividend of Rs3 per share (i.e. 30 per cent) for the first half of fiscal year 2007 ending on December 31, 2006, on Friday, despite of a decline the Company registered in its net income.

Net income of the company posted a decline of 42 per cent to Rs2.3 billion (EPS Rs2.6) from that of Rs4.0 billion (EPS Rs4.6) for the period mentioned above.

Decline in earnings mainly ensued from application of corporate taxation and falling debt profile leading to lower principal repayment, Faraz Farooq of JS Research said.

Corporates announce dividends

Board of Directors of Hub Power Company on Wednesday, recommended an interim cash dividend of Rs1.25 per share (i.e. 12.50 per cent) for second quarter ending on December 31, 2005.

Board announced the interim dividend after its meeting held at London on Tuesday.

Interim dividend will be paid to shareholders whose names appear in the Register of Members at the close of business on March 14, 2007. The Share Transfer Books will remain closed from March 15, 2007 to March 26, 2007 (both days inclusive).

The Company net profit for the period shrank to Rs526.049 million from Rs628.674 million for the corresponding period of 2005.

Is Your Dividend At Risk?

Dividend cuts can surprise investors, even the big players. But that doesn’t mean it’s impossible to know ahead of time whether your dividend is at risk of being reduced. There are several factors that can indicate how safe your dividend income is.

Unlike safe investments such as bank deposits or Treasury bonds, dividends are not guaranteed. If a company runs into a cash crunch, cutting or eliminating dividend payment is one way it can try to save itself, but such action can send the wrong signals to the market. Even safe-haven companies can become dividend investment sinkholes.