SingTel Dials A Wrong Number

stockmarketdownA favourite saying in the stock market is that a rising tide lifts all boats. It is a great way to depict what happens when swathes of money start to find their way into share markets.

As each extra dollar comes into the market to chase yet another share, the price of that share rises because demand exceeds supply. In other words, there are more buyers than there are available sellers.

But here’s another popular saying – a hurricane sinks many ships. And that is what has happened to Singapore Telecom (SGX: Z74), which is down almost 8% from its recent high of S$4.09.

But what has changed since the shares hit its 52-week high?

The answer is nothing.

Nothing fundamental has changed at Singapore’s largest telecom operator that would cause S$5b to be wiped off the value of the company.

All that has happened is the supply of SingTel shares now exceeds the demand.

So what should we as investors do about it?

It’s really quite simple.

If you are an income investor whose reason for buying shares is to receive dividends, then at today’s price of S$3.75 the yield on SingTel shares is 4.5%. If you had bought back on 20 May, you yield would have been 4.1%.

So the question is this: would you prefer a yield of 4.5% or 4.1%?

I know which I prefer. But you’ll have to make up your own mind.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.