Thursday, 28 April 2016

[Opinion] What is a sustainable dividend?

I have been agonising over the perfect post for the last few weeks. How do I get people's attention? I wanted a blockbuster post. A post that unveils some universal truth. I soon drifted back to reality and realised that I could spend the rest of my life trying to achieve this goal. I think it is more useful just to write, share and engage regularly with people who are kind enough to follow my blog.

So I will write once or twice a week. Sometimes posts will be long, sometimes they will be short. Sometimes they will be opinion-based, sometimes they will be fact-based. Sometimes they will be right, sometimes they will be wrong. Ok, you get the drift. The most important thing is to write.

Tonight, I'd like to talk about sustainable dividends. I got the inspiration for this post from Dividend.com. There is an article on payout ratios here.

Basically, how do you know that a company can keep paying you a dividend? Of course, you can never know for sure - we are looking into the future after all. One of the clues a company gives you is its payout ratio or the inverse, which I prefer, the dividend coverage ratio. The dividend coverage ratio is simply the:

Earnings per share / Dividends per share
A dividend coverage ratio of less than 1 means that a company is paying out more than it earned in the current year. Obviously, a ratio greater than 1 means it has paid less than it earned for the current year. As a general rule, you want the ratio to be greater than 1. This means that company is able to reinvest some of its profits back into the business to generate a return. I say "general rule" as there are various situations where a company shouldn't be doing so (e.g. where a companies cost of capital exceeds the expected return on the reinvested profit but this is another blog post). Also, different industries can require different coverage ratios based on levels of investment needed.

The takeaway is this:

If the company is paying you more in dividends than they are earning there is a problem 

Sunday, 24 April 2016

[Table] Weekly Dividend Update - 24 April 2016

I have decided to publish my dividend update on a Sunday night going forward. Here is your dividend update for this week.

Standard Bank (SBK) pay a dividend of R6.74 per share on Monday.

Clicks (CLS) declared results this week. Year on Year, we saw a 16% increase in interim dividend per share declared. In my opinion, this is a pleasing result. Some other key highlights from the SENS announcement include:
  • Group turnover up 13.4% 
  • Diluted headline EPS up 15.1%  
  • Return on equity of 53.1%
I have updated the table to include the CLS results. I have added a column for the historic dividend yield for each company. This is calculated as (last 12M dividends) / (share price). Next week, I will add dividend per share growth for 3, 5 and 10 years (when available).



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).

Monday, 18 April 2016

[Table] Weekly Dividend Update - 18 April 2016

Today, AVI is the only company in my universe to pay a dividend. The R1.50 per share paid is 13.6% ahead of last year. The forward yield of AVI is 4.2% (Using R3.68 DPS Broker Consensus for 30 June 2016 from AVI website). This means the total annual dividend for the year ended 30 June 2016 is expected to be 4.2% of the current AVI price of R87.94 (closing price on 15 April 2016).



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).

Monday, 11 April 2016

[Table] Weekly Dividend Update - 11 April 2016

No more final or interim results this week which means no changes. Two companies in my universe are paying a dividend today.

  • Bidvest (BVT):R4.83 per share
  • Liberty Holdings (LBH): R4.37 per share

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).

Thursday, 7 April 2016

[Article] How to spot a crooked financial advisor via Moneyweb

While "Forget the Noise" is aimed at the investor who wants to build their own share portfolio, some of you will have a financial advisor who looks after your unit trust investments if you have any. I read this article by Warren Ingram (a well-known financial advisor or IFA) on some of the signs that a financial advisor is dodgy or crooked. There are some good points in the article.

Click here to read the article on Moneyweb

Image result for crook image cartoon

Monday, 4 April 2016

[Table] Weekly Dividend Update

Every Monday I will post my dividend growth table. There have been no updates since the last post.

The following companies in my universe paid their dividends today:
  • FirstRand (FSR): R1.08 per share
  • Hyprop (HYP): R2.98 per share (not in the table, but REITs to be added soon)
  • MMI: R0.65 per share
  • MTN: R8.30 per share


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).