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Tuesday, 21 September 2021
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The current yield on a share or trust is simply the latest dividend divided by the current share price, an abstract number at a point in time. What really matters is the income delivered in the long run.
Investing in equities for their dividends and income is not as easy as it sounds. High dividend stocks are more volatile and the dividend is not a sign of quality or value. Take care chasing yield.
While franking credits attached to Australian equity dividends can be a meaningful source of extra returns, a deliberate tilt towards franking can also introduce significant unwanted risks into the portfolio.
Australian companies have a long and frustrating history of wasting billions of dollars of capital on overseas dreams, and institutional investors should be taking a harder line to protect their capital.
Investors chasing high yielding stocks without considering the fundamentals risk falling into the 'income trap', where weak businesses are eventually forced to reduce their dividends.
While investors like receiving healthy dividends, it's money that the company can then no longer use for capital growth. Less can really be more if there are better growth prospects with lower dividends.
The market has been supplying investors with high dividend-paying stocks, but unfortunately, this focus overlooks better opportunities with more growth and capital appreciation.
When building an investment portfolio it's a good idea to buy quality companies at a discount to intrinsic value. But what is that, and how does it fit into portfolio construction?
Over the past seven decades, relatively high ‘real’ dividend yields have pointed to broad equity market rallies ahead. Despite signs of a fully-priced market, investors are still buying for yield.
There’s nothing quite like receiving cash without having contributed any sweat or labour. But are dividends the best way for companies to reward their investors? What's happened to reinvesting for future growth?
Not all company growth is created equal. While a headline growth figure may look impressive, it's how this growth is financed that determines whether it's a good or bad thing for shareholders.
The biggest factor over the past year in Australian equity markets has been investors focussing on dividend yields. Another, perhaps more important, issue is how much a good company reinvests in itself.
Who knew? With some surprise results, the Government is on unexpected firm ground in asking people to draw on all their assets in retirement, although the comments show what feisty and informed readers we have.
The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?
It's a remarkable statistic. In any year since 1875, if you had invested in the Australian stock index, turned away and come back eight years later, your average return would be 120% with no negative periods.
Never stand between Australian households and an uncapped government programme with $3 billion in ‘free money’ to build or renovate their homes. But excess supply is coming with an absence of net migration.
Picking macro trends is difficult. What may seem logical and compelling one minute may completely change a few months later. There are better rewards from focussing on identifying the best companies at good prices.
Some high-quality companies have emerged even stronger since the onset of COVID and are well placed for outperformance. We call these the ‘COVID Opportunists’ as they are now dominating their specific sectors.