[Sunday Update] Christmas greetings

Merry Christmas to all who celebrate Christmas. Here is this week's table. I have added a couple of companies and put a long-term growth number instead of the two previous measures. It measures the long-term average growth in dividends of each company. 

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[Wednesday Wisdom] Tyranny of Compounding Costs

"The miracle of compounding returns is overwhelmed by the tyranny of compounding costs."

If, for one second, we believe traditional active management adds value, its benefit is overshadowed by its cost. John Bogle sums this up with his famous quote above.

#ForgetTheNoise #Bogle #Invest #Costs #Compounding

[Sunday Update] Winding down

Christmas is a quiet time for markets. Forget the Noise will continue to publish a weekly update of dividend data minus any commentary. Thank you for all the support in our first year!

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Here is this week's dividend data.

[Video] A look back at wisdom shared on the blog

[Wednesday Wisdom] Nothing is certain

“Many investors insist on affixing exact values to their investments, seeking precision in an imprecise world, but business value cannot be precisely determined.”

Seth Klarman is an American billionaire who founded the Baupost Group, a Boston-based private investment partnership, and the author of a book on value investing titled Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.

#ForgetTheNoise #Dividends #Wealth

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[Sunday Update] Christmas cheer

The festive season is approaching fast but we had no dividend gifts this week. Things are quietening down as many business leaders take a well-earned break. This means all we need to do this week is to have a quick look at our dividend table and continue investing. Have a great week of dividend hunting.

#ForgetTheNoise #Investing #Wealth

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Forecasting Folly

"There are 60,000 economists in the U.S., many of them employed full-time trying to forecast recessions and interest rates, and if they could do it successfully twice in a row, they'd all be millionaires by now...as far as I know, most of them are still gainfully employed, which ought to tell us something."

Another quote from Peter Lynch which highlights the follies of trying to forecast recessions and interest rates.

#ForgetTheNoise #Dividends #Wealth

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[Sunday Update] A quiet week for some, noisy for others...

It was a quiet week on the dividend front. Of course, there was lots of noise on ratings (we discussed this last week). After quiet weeks, we simply spend a couple of hours looking at our portfolio. We start by reading through the last week of SENS announcements to see if there is any dividend news. We also keep an eye out for any other critical company announcements. Next, we review our dividend table to remind ourselves of current yield and growth rates. Unless there is an obvious need to take action, we leave our portfolio alone. We don't tinker. If we did, we would probably make value-destroying changes!

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[Wednesday Wisdom] Recessions are a reality

"You get recessions, you have stock market declines. If you don’t understand that’s going to happen then you’re not ready, you won’t do well in the markets."

Some thoughts from Peter Lynch, a former fund manager. While he was a full-blown active manager, I concede he talks sense. :)

#ForgetTheNoise #Invest #Dividends #Wealth

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[Sunday Update] What is all the fuss about?

Guess what? If (many say when) SA gets cut to junk by the rating agencies, the world will carry on. SA won't be the first and last country to have a junk rating. Of course, market commentators will talk about increased bond yields and market corrections. We know better. We concede we will probably have lots of market volatility. We choose to ignore it. We choose to focus on the data that matters in the very long term. So, smile when you hear people freaking out about ratings. Chuckle when you hear political parties get their knickers in knot because of rating agency comments on political risk. Don't get me wrong, a rating downgrade is bad news. I am just saying there is no need to go and make wholesale changes to your investment portfolio. The world will survive and your diversified investment portfolio will be fine in the long run.

Updates this week include:

• HCI (SENS) dividend up 13%
• PFG (SENS) dividend up 10%
• RLO (SENS) dividend up 8%
• TBS (SENS) dividend up 15%

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Invest cheaper than the index… it’s possible!

I love indexing. I think it is a great investment strategy for anyone who doesn't want to spend one second thinking about their investments. In my opinion, if you are disciplined and buy an index fund every month of your entire career, you should have a great investment outcome.

I also dislike active investing. I have made these thoughts known before. I think 10x do a great job summing up the futile hunt for alpha here.

So what do I do? I kind of sit in no man's land. I take the low costs and low portfolio turnover aspects of passive that I like. I make a commitment to spend a couple of hours a week managing my portfolio. I buy well-known companies (not too dissimilar to what lives in an index) who can on average grow their dividends ahead of inflation. I don't sell companies. I am not a serial dater. I like to be married to them. I have a clear objective. I am not trying to beat the market but instead trying to build a passive income stream. All of this I go through in detail in Forget the Noise.

I have got a bit side-tracked. The reason for this post was fees and indexing. I was interested to calculate what fees I am paying on my investment. Before, I tell let's look at two Satrix index funds.

Satrix All Share Unit Trust

The Satrix ALSI Index Fund tracks the performance of the FTSE/JSE All Share Index. The index constitutes the 160 largest companies, by market capitalisation, listed on the JSE. The larger the company (by market capitalisation), the larger the weighting of the company’s share in the index. (source: Satrix website)

Management Fee direct to retail investor: 0.513% including VAT

Management Fee via LISP: 0.285% including VAT + LISP fee of 0.50% to 1.00% (Expensive!)

Satrix Balanced High Equity Unit Trust (good proxy for my portfolio)

The Satrix Balanced Index Fund complies with all limitations of Regulation 28 and offers diversified exposure to all the key local and international asset classes, with a smart SA equity core. The fund tracks the proprietary or custom Satrix Balanced Index and invests in a range of underlying smart equity indices: FTSE/JSE Dividend Plus Index (value exposure), FTSE/JSE Equally Weighted Top 40 Index (size exposure) and Satrix Momentum Index (momentum exposure). All asset classes, constituting components of the composite index tracked by the portfolio, are tracker products (except for domestic cash). (source: Satrix website)

Management Fee direct to retail investor: 0.684% including VAT

Management Fee via LISP: 0.399% including VAT + LISP fee of 0.50% to 1.00% (Expensive!)

My Portfolio

You may be amazed to know that the total fees I am paying on my portfolio are 0.28% including VAT. The vast majority of these fees are monthly bank charges. I have included all costs other than brokerage (I have done the same for the unit trusts). I don't trade a lot and brokerage adds a relatively immaterial cost and limited to purchases only. 

Secondly, as my portfolio grows my costs are fixed. This means that the 0.28% is only going to get lower. I can see a time when I am paying less than 0.10% per annum! In a index unit trust or ETF, fees are tied to AuM so costs are not fixed.

Contrary to popular belief, you can construct your own portfolio far cheaper than any index fund in the South African market. A good place to start is EasyEquities by Purple Group. They charge 64c per R100 of trade and no monthly fees. You won't find a more affordable stockbroker in South Africa.

I am not knocking index investing. It is a great strategy! My point is that you can build a diversified portfolio with an inflation-hedged income stream which costs less than an index fund in South Africa. You just need to be prepared to spend a couple of hours a week on your portfolio. If you don't want to do that, then please index away!

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[Sunday Update] A wad of dividends

Happy Sunday! There were lots of dividends this. I have summarised the changes in DPS below:

• Coronation decreased its dividend by 19% (CML) (SENS)
• Vodacom kept its interim dividend flat (0%) (VOD) (SENS)
• Mr Price (MRP) decreased DPS 8% (SENS)
• Spar (SPP) increased its dividend by 4% (SENS)
• Investec (INP) increased DPS by 5% (in GBP terms) (SENS)

Other than Investec, these are not inflation-beating results. No cause for alarm just yet as 6 months is a very short period in financial markets.

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[Wednesday Wisdom] Long-term investor

"The historical data support one conclusion with unusual force: To invest with success, you must be a long-term investor"

John Bogle is the founder of Vanguard. He is also seen as the father of passive investing. He has written many books on investing. The Clash of the Cultures is among one of my favourite investment books of all time.

Quote courtesy of #TEBI

#ForgetTheNoise #Investing #Dividends

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[Sunday Update] Noise everywhere

It's Sunday so that means it is dividend update time. Noise levels remain elevated globally. Trump, Zuma, State of Capture, Hard Brexit, Aleppo, Mosul et al are all clogging the airwaves. We must look past the noise and continue on our dividend investing crusade. We are not market timers nor prophets so we won't guess how the world will play out in the next 6 to 12 months. We worry about the next 10 to 30 years. If stock markets exist then, I am sure that our investments will have done just fine. If stock markets don't exist in the future, we will have far greater worries than our investments.

Three companies in the Forget the Noise universe declared results. Life Healthcare (LHC) increased its final dividend by 7% (SENS) while Foschini (TFG) increased its interim dividend by 5% (SENS). Lastly, Lewis (LEW) declared a dividend of R1 per share (down 50%, SENS).

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The views on this website are my own and do not convey the views of the organisation I work for.

Nothing on this website constitutes financial advice. All content is mere opinion and is not based on anyone's specific circumstances and/or needs. It is based on factual data and does not contain any recommendations. Use of any information on this website is at your own risk.

I have tried my best to ensure that all data and information is accurate. Errors and Omissions are Excluded (E&OE).

[Wednesday Wisdom] Forget the Noise... again

This year keeps getting stranger. Sometimes we need to just step back and relax. The sun will rise tomorrow and companies will continue to pay dividends. It may be useful to listen to author, Seth Godin.

"Until you remove the NOISE, you’re going to miss a lot of SIGNAL"

#ForgettheNoise #Investing #Wealth #Noise

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[Sunday Update] Sense prevails

Good morning. All is well that ends well. Sense prevailed and charges were dropped. There are less distractions now. Of course, we can't count our chickens just yet. It will be an interesting next 6 to 12 months in South Africa.

There was no news that we actually care about this week (i.e. dividend news). This means all we need to do is have a look at our table and refresh our memories as to what is happening in the dividend world of 46 companies.

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[Wednesday Wisdom] Investing is about business

"The successful investor is usually an individual who is inherently interested in business problems."

Philip Fisher achieved an excellent record during his 70 plus years of money management by investing in well-managed, high-quality growth companies, which he held for the long term.

#ForgetTheNoise #Invest #Investing #Wealth

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[Sunday Update] Clickity Clicks

Happy Sunday! Trouble continues to brew on the political front. I am not only talking about South African politics. We have the US election around the corner. These captains of society make life interesting. The only lesson I am learning is "You can't trust a politician". Luckily, we know better. We know that dividends are things that truly matter. On the dividend topic, Clicks (CLS) was kind enough to give us a 16% increase in DPS. You can read the SENS announcement here.

I have also added five companies to the share list. They are:

• KAP
• SNV (Steinhoff)
• TKG (Telkom)
• LEW (Lewis)
• PFG (Pioneer Food Group)

The list now contains 46 companies. I need to add a few more but the ones left are "funnies". I need to make some adjustments for currencies. For example, Mediclinic now reports in GBP instead of ZAR.

If you want to go to a page where you can copy and paste the share data then go here.

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Nothing on this website constitutes financial advice. All content is mere opinion and is not based on anyone's specific circumstances and/or needs. It is based on factual data and does not contain any recommendations. Use of any information on this website is at your own risk.

I have tried my best to ensure that all data and information is accurate. Errors and Omissions are Excluded (E&OE).

[Book] Empire of the Fund

I have added Empire of the Fund: The Way We Save Now to my reading list. It was recommended from an economist article. I'll reproduce some of that article here:

"AMERICANS who want a comfortable retirement, and who work in the private sector, have to look after their own interests these days. No longer can most rely on their employer to pay a pension linked to their final salary; such defined-benefit promises are too expensive.

Instead, workers are promised something called a defined-contribution (DC) pension which, truth be told, isn’t a pension at all. It is a savings pot to which employers and employees contribute, with some tax advantages. How big that pot will be, and what kind of income it will provide, is unknown.

Most of those savings will probably be invested in mutual funds. Yet as William Birdthistle, an academic lawyer, writes in an entertaining new book, small investors need to become better informed about the way mutual funds work."

Forget the Noise is about helping the small investor and I look forward to reading Willaim Birdthistle's insights to see how they fit in my "Forget the Noise" World.

Link to Economist article.

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[Article] Who cares when the next recession comes

When is the next recession going to hit? Who cares. This is a great Bloomberg article by Barry Ritholtz.

"You have to hand it to economists -- they say the darndest things.

In a Wall Street Journal survey, a group of economists “put the odds of the next downturn happening within the next four years at nearly 60 percent.”  Oh no.

Today, we will make another entry in the catalog of how worthless predictions tend to be, and more specifically why economists’ long-term forecasts are so uniquely useless."

http://bloom.bg/2en17ey

#Investing #ForgetTheNoise #Recession #Economics

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[Sunday Update] An accountable government

I am not much of a political commentator but I hope all the protests and court cases looming in South Africa is the beginning of an accountable South African government. Maybe I am optimistic instead of realistic. As an investor, my comments last week stand. Keep living your life but make sure you have a backup plan.

There was no news on the dividend front. Distell did publish a trading update on SENS (which is one of the few news sources you should monitor :) ).

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As always, here is your weekly table:

[Wednesday Wisdom] Dividends are tangible

"A stock dividend is something tangible — it’s not an earnings projection; it’s something solid, in hand. A stock dividend is a true return on the investment. Everything else is hope and speculation."

Richard Russell (July 22, 1924 – November 21, 2015) was an American writer. He was famous for writing the Dow Theory newsletter.

#ForgetTheNoise #Dividends #Invest #Investing #Money

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[Sunday Update] What a week. What next?

It was challenging to "forget the noise" this week. This is why I spent a whole chapter on Risk in my book. Instead of share price volatility, I discussed risks such as inflation, confiscation and devastation. State Capture in South Africa is a risk. With this risk comes possible confiscation of land/property. I think it is an unlikely risk as I hope the rule of law triumphs and those who break the law end up in prison and those who are trying to build a better future do not end up in court. That is all I will say about that. More importantly, what should an investor do?

I believe you should have an "insurance policy" in place. Not a real insurance policy but have hard currency investments/cash (think GBP and/or USD). Every few months send some money offshore to an offshore bank account. Ensure you have enough cash on hand to pay a deposit to rent a flat and a few months rent while you look for a job. You should also have some hard cash on hand to pay for food and day-to-day expenses. Any excess cash should be invested. You can use a trading solution like Interactive Brokers. The important thing is to make sure the money "lives" offshore. There is no point in investing in SA-based investments linked to offshore markets (unless cost is a real issue for you).

The above strategy does have a couple of roadblocks. One is that it can be costly (I call this your "insurance premium"). The other is you need the right to live overseas somewhere.

Now before you call me a prophet of doom, I think it is unlikely that the above insurance policy will be needed. It is, however, prudent to have one in place. I will also continue to build my SA investment portfolio and focus on dividends (no surprise there!).

Here is your updated table:

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[Wednesday Wisdom] Gold vs Dividends

"Gold is a commodity; over the long run, as we look back, it has not been a good investment. You can't look at the intrinsic value of gold as you can a business. Gold doesn't give you cash flow, and, at the end of the day, cash flow is what is important. Gold doesn't give you dividends."

Michael Lee-Chin, OJ (born 1951) is a Jamaican business magnate, investor, and philanthropist. He is the founder and Chairman of Portland Holdings Inc., a privately held investment company which owns a collection of diversified operating companies in sectors that include media, tourism, health care telecommunications and financial services. Among other positions, he was the Executive Chairman of AIC Limited (a Canadian mutual fund), and, as of December 2014, the Chairman of the National Commercial Bank of Jamaica. Canadian Business has named him as one of the richest people in Canada and one of the richest Jamaicans, and estimates his wealth to be over CAD$2.0 billion.

#ForgetTheNoise #Investing #Dividends #Gold

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[Sunday Update] Woolies buys Politix

G'day. Woolies (WHL) announced that they are buying Aussie retailer, Politix. Politix sells Australian designer menswear with 75 stores across Australia. It had FY2016 sales of A$56 million (c. ZAR 588m). Former Liverpool FC and Socceroo star, Harry Kewell is a brand ambassador. For information please see the official SENS announcement.

Other than that, it has been a relatively quiet week. Here is your updated table:

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[Wednesday Wisdom] Praise for dividend investing

"Dividends may not be the only path for an individual investor’s success, but if there’s a better one, I have yet to find it"

Josh Peters is the editor of Morningstar DividendInvestor, a monthly newsletter that provides quality recommendations for current income and income growth from stocks.Josh manages DividendInvestor's model dividend portfolio, the Dividend Select Portfolio.

#Dividends #ForgetTheNoise #Investing

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[Sunday Update] Rain and dividends

Hello from a rainy Durban. This week saw some dividend news from Capitec Bank. Shareholders will be pleased with the 20% interim dividend increase (see SENS here).

Other interesting news involves both Remgro and Distell. SAB owns 26% of Distell but has to sell its stake in order to complete a merger with Anheuser-Busch InBev NV. Together they will form the largest brewer in the world. Competition authorities are, of course, not ecstatic about it. They have attached conditions to the deal. One condition is that SAB sells its stake in Distell. Remgro has first right of refusal on SAB's 26%. See this link for more details.

As usual, here is your weekly dividend information:

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[Wednesday Wisdom] Mark Cuban and dividend stocks

"I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it."

Mark Cuban is an American businessman and investor. He is the owner of the NBA's Dallas Mavericks, Landmark Theatres, and Magnolia Pictures, and is the chairman of the HDTV cable network AXS TV. According to Forbes, he is worth USD 3.3 billion.

[Sunday Update] Quiet on the dividend front

There is no SA dividend news to report this week. Those of you tuned into the financial markets (for better or worse) will know that Governor Kganyago kept the repo rate steady at 7%. Inflation has dipped below the SARB's 3 - 6% target band which our friendly market commentators have used as justification for the SARB's move (or lack there of). Us long-term dividend investors just nod and smile and say "of course", we then get back to collecting our dividends.

Here is your updated dividend table:

Written by: Geoff Noble
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Quick Friday Thought on Active Investment

I came across an article on LinkedIn called "The Professor Who Was Right About Index Funds All Along". The article is about Burton Malkiel and how he was right about the success of index funds many years before they became mainstream. I paused on an excerpt from his book, "A Random Walk Down Wall Street":

“a blindfolded monkey throwing darts at the stock listings could select a portfolio that would do just as well as one selected by the experts.”

Malkiel's quote made me chuckle as it is probably true that a blindfolded monkey can do just as well as the experts. And a blindfolded monkey doesn't charge 1.5% to 2% a year to do so! I find it amazing that in this day and age, investment houses continue to insist on building large research terms to find "alpha". It amazes me that such highly qualified and intelligent people can kid themselves on the value a big active investment team adds.

My point is this: While I am not really interested in debating the merits of full-blown active investing, I don't think the cost of most active investments is worth it. All you are doing is making someone else rich at your expense. I believe by investing a couple of hours a week in your own investment portfolio you can save yourself some money (a lot of money over the long-term) and do just as well as any so-called expert in the field.

Written by: Geoff Noble
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[Wednesday Wisdom] Quote from Rockefeller

Today, we remember the wise words of Rockefeller. He was quite fond of collecting dividends!

[Sunday Update] More stocks added

Happy Sunday. I am writing from a cold and rainy Durban. I have added to the stock list and we are up to 41 companies. In the next couple of months, I hope to have 50 SA stocks and an international list of another 20 to 30 US, UK and Swiss stocks.

This week AVI and RMI reported results:

• AVI increased their final dividend by 10% :) (Sens)
• There was a little less cheer for the RMI increase of 2% (Sens)

Here is your list for this week:

Written by: Geoff Noble
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Disclaimer: I have tried my best to ensure that the table above is accurate. It is based on factual data and does not contain any recommendations. Errors and Omissions are Excluded (E&OE).

[Wednesday Wisdom] Dividend thoughts from Bogle

Every Wednesday I will share a quote on dividend investing. This week's quote is from John Bogle. John Bogle is the founder of Vanguard. He is also seen as the father of passive investing. He has written many books on investing. The Clash of the Cultures is among one of my favourite investment books of all time.

Written by: Geoff Noble
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[Sunday Update] Busy week on Forget the Noise

It has been a busy week on Forget the Noise. I have added some more companies to the stocks list. The list now stands at 37 securities. I plan to add another 13 South African securities (50 in total). After that, I will create a US, UK and Swiss list of securities. Lastly, I will need to create a REIT (or listed property) list. You should then be well covered on the investment front. Remember, these are not recommendation lists but lists of factual information that should hopefully assist you in your quest to build a long-term income stream.

It has also been a busy couple of weeks on the results front:

• MMI kept their final dividend flat (slightly up on full year basis - SENS)
• Bidvest (BVT) decreased their dividend but these must be seen in the context of the Bidvest unbundling (SENS)
• First Rand (FSR) increased their final dividend ever so slightly (by 1c per from 117c to 118c! - SENS)
• RMB Holdings (RMH) decreased its final dividend from 154c to 153c (SENS)

I relentlessly write about "forgetting the noise" but this is not noise. Dividends are the key metric I monitor. I am concerned about the increasing lack of real dividend growth. I am not panicking just yet but I am aware the number of "Reds No's" in my table is growing. Not a pretty picture!

Written by: Geoff Noble
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Disclaimer: I have tried my best to ensure that the table above is accurate. It is based on factual data and does not contain any recommendations. Errors and Omissions are Excluded (E&OE).

[Quote] Mistakes and ego

Geoff Noble
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[Article] Don't be Fooled by Survivorship Bias

Ben Carlson wrote a great piece yesterday explaining survivorship bias in hedge fund indices. He used the infamous Long-Term Capital Management (LTCM) as an example. LTCM was full of brains (think PhD's and Noel Laureates) but had a spectacular downfall. Interestingly, only the positive results of LTCM's returns history are included in most hedge fund indices. At some point when LTCM started doing badly, they stopped reporting returns data which meant index providers stopped recording their results. This is an example of survivorship bias which is far too prevalent in finance.

Ben highlights the following to consider when looking at data:

• Understand your sources of data.
• Never blindly accept facts and figures about the markets just because they contain decimal places.
• All numbers require context.
• Look for holes in the data and your own thinking.
• Don’t forget about implementation costs and behavioral issues.
• You can use historical data to guide your actions, but always be aware of the limitations.

Read Ben's article here.


Written by: Geoff Noble
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Monday morning quote from Howard Marks