It can be tough to bring yourself to buy a stock that’s scaling a new all-time high.
When a business is doing well, investors will naturally bid up its share price.
However, weak short-term sentiment may lead to a sharp decline in share prices across the board, including blue-chip stocks.
Such falls may present a great opportunity to accumulate shares of strong, well-run companies.
Recently, the share price of Singapore’s largest bank, DBS Group (SGX: D05), fell nearly 10% from its all-time high close of S$37.25.
Are the lender’s shares worth accumulating, or should you hold back?
Robust financials
First, let’s examine the financial standing of the bank as it navigates the choppy economic landscape over the last two years.
The bank recently reported a record net profit of S$6.8 billion for its fiscal 2021 (FY2021).
This stellar performance came about despite a 7% year on year fall in net interest income.
Healthy loan book growth, along with surging fee income, helped to more than offset the decline in net interest income.
DBS also expressed optimism that net interest margins will begin to rise in the coming quarters as interest rates move up.
Opening up new sources of revenue
The bank is also exploring different areas to open up new sources of revenue for itself.
This is a good move as it ensures the bank is not overly reliant on net interest income to power its growth.
In May last year, it collaborated with Singapore Exchange Limited (SGX: S68), Standard Chartered Bank and investment firm Temasek Holdings to launch Climate Impact X.
Climate Impact X is a global carbon exchange and marketplace that facilitates the sale of high-quality, large-scale carbon credits that cater to multinational corporations and institutional investors.
DBS is also working with Temasek on two other initiatives — Partior and Evolution X.
Partior is a platform that aims to leverage blockchain technology to reduce friction and flows for cross-border payments and foreign exchange settlements.
Evolution X is a US$500 million growth stage debt financing platform to help technology-enabled companies to grow.
And in a move to tap on the keen interest in cryptocurrencies, DBS launched a digital exchange in December 2020.
Last year, the trading value of this exchange hit S$1.1 billion and is seeing strong interest from customers.
Acquiring for growth
Aside from organic growth, DBS has also been busy on the acquisitions front.
In November 2020, the bank announced its decision to take over the troubled Indian bank Lakshmi Vilas Bank by injecting a total of S$463 million.
Then, in April last year, DBS took up a 13% stake in Shenzhen Rural Commercial Bank for around S$1.08 billion, making further inroads into the Middle Kingdom.
And just two months ago, the lender bid successfully for Citigroup’s (NYSE: C) consumer banking business in Taiwan, forking out around S$2.2 billion.
These acquisitions will, no doubt, take time to assimilate, but DBS seems to be headed in the right direction as it expands its franchise through opportunistic purchases.
Quarterly dividends and a decent yield
Finally, income-seeking investors will have a smile on their faces when it comes to DBS’ dividend policy.
Not only does the bank pay out quarterly dividends, but it has also restored the S$0.33 per quarter dividend that it was paying before the pandemic hit.
This move came about after the Monetary Authority of Singapore lifted dividend restrictions on all local banks in July last year.
Furthermore, DBS has announced that it will raise its quarterly dividend for the fourth quarter of FY2021 to S$0.36 per share, implying an annual dividend of S$1.44 per share moving forward.
Income investors who scoop up the bank’s shares can enjoy a forward dividend yield of 4.2%.
Get Smart: While you see a chance, take it
You don’t get many chances to witness sharp falls in share prices of well-run, growing businesses.
So, when such a chance comes along, you should grab it.
DBS has demonstrated its resilience throughout the pandemic and is broadening its income streams.
The bank is also paying out a healthy dividend four times a year and has conducted acquisitions to grow its top and bottom lines over time.
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Disclaimer: Royston Yang owns shares of DBS Group.
