What you need to do

1. Sort the 30 KLCI component stocks by their dividend yield, from high to
low. Something like below:
Stock name Div Yield
MAXIS 5.53
MALAYAN BANKING 5.05
BAT MALAYSIA 4.37
TELEKOM MALAYSIA 4.15
UMW HOLDINGS 3.54
SIME DARBY 3.37
AXIATA GROUP 3.36
PETRONAS CHEMICALS 3.34
TENAGA NASIONAL 3.33
DIGI.COM 3.25
GAMUDA 3.18
KUALA LUMPUR KEPONG 3.05
HONG LEONG FINANCAL 3.04
PUBLIC BANK 3.01
HONG LEONG BANK 2.98
CIMB GROUP HOLDINGS 2.97
IOI CORP 2.85
RHB CAPITAL 2.75
YTL CORP 2.71
PETRONAS GAS 2.41
AIRASIA BERHAD 1.89
PETRONAS DAGANGAN 1.88
MMC CORP 1.68
GENTING MALAYSIA 1.54
PPB GROUP 1.35
BUMI ARMADA 0.80
GENTING 0.61
AMMB HOLDINGS MISC BERHAD YTL POWER INTL 2. Choose one fine day when KLCI drop sharply
3. From the list above, select the Top 10 stocks with highest dividend yields.
4. From the Top 10 stocks selected in Step 2, select the Best 5 stocks with the
lowest price (that is, highest yield/lowest price).

5. Buy an equal dollar amount of each stock.

6. Hold those stocks for a year
...........wait..............and wait...................
Approx 1 year later, repeat the process from Step 1 to 4 again (remember to
update the list with latest dividend yield). .
If the stocks you owned are excluded from the new rankings, sold them off and use
the proceeds to buy in the replacement.
Keep shuffling your portfolio of Best 5 stocks on an annual basis by holding on to
the "cheapest-highest yield" dividend blue chips.
That's it! What could be simpler?
Yet this simple strategy has been a market slayer. Not only do you benefit from
capital gain by leveraging on lower priced blue chips, you also enjoy inflow of high
dividends! If your stocks perform, keep them. If your stocks underperform, replace
them. In this way, you mercilessly force your money and stocks to work very hard!
Rationale
Blue chip companies do not alter their dividend to reflect trading conditions and,
therefore, the dividend is a measure of the average worth of the company. The
stock price, in contrast, fluctuates through the business cycle. This should mean
that companies with a high dividend relative to price, are near the bottom of their
business cycle and are likely to see their stock price increase faster than low yield
companies. Under this model, an investor annually reinvesting in high-yield
companies should out-perform the overall market. The logic behind this is that a
high dividend yield suggests both that the stock is oversold and that management
believes in its company's prospects and is willing to back that up by paying out a
relatively high dividend. Investors are thereby hoping to benefit from both above
average stock price gains as well as a relatively high quarterly dividend.
Of course, several assumptions are made in this argument.
- 1. the dividend price reflects the company size rather than the company business
model.
- 2. companies have a natural, repeating cycle in which good performances are
predicted by bad ones.
- 3. Blue chips have better fundamentals, and institutional investors will always
focus on the largest companies