Australian Sharemarket

[Empty Pockets]

I have limited knowledge about shares. I have some employee bank shares from years ago, a small amount in a managed fund and "had" some ABC learning shares which I seem to have misplaced somewhere

I've been looking at the yields of companies in the ASX200 and can't get over how low they are. I read the interview with keithj where he talks about buying blue chip shares with 7%+ yields which lends me to think now is not the time to get into shares as many are below 4%.

So my question for the people that think they know the market, are shares currently overvalued, or should we expect an increase in profits as the GFC winds down - hence increasing dividends or maybe a combination of both

 

[Shaneelastic]

I have limited knowledge about shares. I have some employee bank shares from years ago, a small amount in a managed fund and "had" some ABC learning shares which I seem to have misplaced somewhere

I've been looking at the yields of companies in the ASX200 and can't get over how low they are. I read the interview with keithj where he talks about buying blue chip shares with 7%+ yields which lends me to think now is not the time to get into shares as many are below 4%.

So my question for the people that think they know the market, are shares currently overvalued, or should we expect an increase in profits as the GFC winds down - hence increasing dividends or maybe a combination of both

Depends on which shares you are lookng at. Different Sectors will always have different yields. Traditionall Resources shares put profits back into the compay where as industrial type shares have a higher yield.

I think your point of 4% is slightly misleading. Lets have a look at say the top 4 shares.

BHP 2.3% fully franked
CBA 4.4% fully franked
NAB 5.3% fully franked
WOW 3.9% fully franked

Okay, so tax on these to 30% has already been paid by the company. So what you need to do is hold these shares in a low tax bracket such as a super fund at 15% or a superfund in pension phase at zero tax. Now if you were to hold these in this enviroment, your dividend yield is higher as you will get the franking credits back via your tax return.

Also, these bank shares were at higher yields 18 months ago, but because they havent grown there dividends as significantly and there prices rebounding to near high individual share levels they seem alot lower.

You could pick up bank shares at 10% yield during the worst days back in March 09.

 

[BV]

You could pick up bank shares at 10% yield during the worst days back in March 09.

In that case do you think they are currently overvalued?

If I have to pay 8% or more in interest on a margin loan and only get 4% or 5% in return and considering the risks involved it does not look like a good investment

 

[Intrinsic_Value]

I've been looking at the yields of companies in the ASX200 and can't get over how low they are. I read the interview with keithj where he talks about buying blue chip shares with 7%+ yields which lends me to think now is not the time to get into shares as many are below 4%.

So my question for the people that think they know the market, are shares currently overvalued, or should we expect an increase in profits as the GFC winds down - hence increasing dividends or maybe a combination of both

Dividends are dictated by four main factors:
1) the current prosperity of the company(ie profits)
2) the share price (inverse relationship)
3) the degree of credit available (easy credit environment higher pay out ratios of profits in the form of dividends)
4) the growth cycle of the company, generally higher growth lower dividend payout

Therefore looking at just historical dividends can distort ones ability to make an intelligent investment decision.
I made this mistake going into the GFC when i thought some companies were good buying based on their dividend yld only to see those dividends slashed, either through share placements (equity dilution) or lower payout ratios.

As to whether the stockmarket is over valued refer to this post:

http://www.somersoft.com/forums/showpost.php?p=621239&postcount=95

Essentially the stockmarket trys to look forward. So basically you have to try to estimate how profits will flow post 2010 and then compare them to interest rates (which gives you the risk free return comparison, the higher the interest rates the higher the minimum return required on equities and the lower the PE ratios at 'fair value' all other factors being equal).

Personally i dont have a clear view to 2011, but i do feel that if you can take a 5 year view point, there is a high degree of probability that equities at current prices are still good value.

 

[willair]

I have limited knowledge about shares. I have some employee bank shares from years ago, a small amount in a managed fund and "had" some ABC learning shares which I seem to have misplaced somewhere

I've been looking at the yields of companies in the ASX200 and can't get over how low they are. I read the interview with keithj where he talks about buying blue chip shares with 7%+ yields which lends me to think now is not the time to get into shares as many are below 4%.

So my question for the people that think they know the market, are shares currently overvalued, or should we expect an increase in profits as the GFC winds down - hence increasing dividends or maybe a combination of both

I don't know which way it will go,but several in this site bought when the
yields on some banks were above 10% a while back,Biota Holdings went up 650% last year,and when you look at the key measures of Australian Economics,unemployment is still low,real gdp is till above the water line,
the only problems will be the cash rates and how high they go,so much can change in 6 months,if inflation starts to kick in,I just watch the price of "OIL" in the equities trading world,everything spans off that price..
imho..willair..

 

[jaycee]

Depends on which shares you are lookng at. Different Sectors will always have different yields. Traditionall Resources shares put profits back into the compay where as industrial type shares have a higher yield.

I think your point of 4% is slightly misleading. Lets have a look at say the top 4 shares.

BHP 2.3% fully franked
CBA 4.4% fully franked
NAB 5.3% fully franked
WOW 3.9% fully franked

Okay, so tax on these to 30% has already been paid by the company. So what you need to do is hold these shares in a low tax bracket such as a super fund at 15% or a superfund in pension phase at zero tax. Now if you were to hold these in this enviroment, your dividend yield is higher as you will get the franking credits back via your tax return.

Also, these bank shares were at higher yields 18 months ago, but because they havent grown there dividends as significantly and there prices rebounding to near high individual share levels they seem alot lower.

You could pick up bank shares at 10% yield during the worst days back in March 09.

TLS ? what are they 9% now ?

 

[redwing]

I just need to know three things in relation to the stock market for 2010

1. What Stock/s to Purchase?
   
2. When to Purchase it?
   
3. When to Sell it?

 

[lizzie]

you also need to be able to guage future markets. the value of iron ore is expected to increase by 20% over the next calendar year as demand from china and india increases ... this will also potentially drag up the value of other base metals used in the production of steel. so profits from ore based resource companies have the potential to rise, and hence higher dividends.

it is all a bit of a guessing game - but also a researched one.

 

[Shaneelastic]

TLS ? what are they 9% now ?

I didn’t quote TLS as I believe that they cannot grow their revenue as the companies I quoted can.

Unless you care to explain how they will grow revenues?

Quite frankly there are a lot better blue chip opportunities in the market than TLS.

 

[Aaron Sice]

12 month $52 option contract on STW

 

[jaycee]

I didn’t quote TLS as I believe that they cannot grow their revenue as the companies I quoted can.

Unless you care to explain how they will grow revenues?

Quite frankly there are a lot better blue chip opportunities in the market than TLS.

Unfortunatley I cant explain much at all ! It was more like a question

I just like their dividend. Seem to have trading opportunities (small %ages) though

No idea how this NBN stuff will affect their/real perceived stability either

 

[Shaneelastic]

Unfortunatley I cant explain much at all ! It was more like a question

I just like their dividend. Seem to have trading opportunities (small %ages) though

No idea how this NBN stuff will affect their/real perceived stability either

Alot of people do like the dividend, especially in tax free super funds.

That said, has my question got you thinking about its business?

Telstra are a price taker now, there is alot of competition in all areas from optus, vodaphone and three, also virgin and a couple smalle ISP's.

Home Phones are last decades technology, when i move into my house I wont need one. For internet i'll use a wireless modem with 3. These things make it hard for Telstra to increase there revenues. Also think of the ageing infrastructure.

Now think of the opposite, say a price maker, BHP, (Woolworths To an extent) are ones. Both do not have as much competeition as Telstra, Woolworths is branching out via Petrol and Pubs/gaming. BHP is the best run miner in the world with heaps of reserves, plenty of demand and plenty of cash to take out junior explorers/producers early.

My question is, how long can Telstra ustain there dividend?

 

[jaycee]

That's what I asked in my last sentencc.. how stable are they ?

Wht does surprise me is how focussed commentary on telstra is on residential land lines.. do people understand the amounts of revenues in the business market ?
eveyone is aware of those things, how theyre being tackled I'm not so aware of , or how well, or badlly, which is why I dont know what's going to happen !

But in the meantime the NBN is more of a concern than immediate erosion of revenue, not that much new has popped up overnight that should make it dissappear just as quick, competion and new products have been around since they first floted (and before).

 

[hobo-jo]

I just need to know three things in relation to the stock market for 2010

1. What Stock/s to Purchase?
2. When to Purchase it?
3. When to Sell it?

Gold/Silver Mining Stocks
When the price is low
When the price is high



IMO look for the unhedged, mid tier, profitable producers who have a large resource (1moz+), safe cash position and facility to expand their operations in the short to medium term. And stay away from AXM/CTO, they are dogs.

Plus there is plenty of opportunity in the juniors, but much higher risk.

 

[redwing]

Gold/Silver Mining Stocks
When the price is low
When the price is high



IMO look for the unhedged, mid tier, profitable producers who have a large resource (1moz+), safe cash position and facility to expand their operations in the short to medium term. And stay away from AXM/CTO, they are dogs.

Plus there is plenty of opportunity in the juniors, but much higher risk.

Ha Ha

Thanks

Which ones (i.e. Newmont who bought thier hedge back some time ago) or..? Maybe the physical asset Gold/Silver

I know someone who did well during the GFC in their SMSF with Coins

The Madness of Markets >

 

[VYBerlinaV8]

I'm a bit of a shares illiterate, and I invest through managed funds, which I choose based on investing style, fees and past performance. I make a contribution, which includes a geared potion, every month, and have done for about 8 years now. I reinvest all dividends.

It gets an OK rate of return, long term the portfolio seems to be getting 11-12% (including growth and yield). I plan to keep doing this for another 10-12 years, then stop contributing and have the dividends sent to me rather than reinvested.

I realise, of course, that past performance doesn't necessarily indicate future performance, but so far I'm pretty happy with th results. I'm also starting to focus on more yield-oriented funds now. At the current rate of return I should have comfortably more than a million dollars worth of shares equity in 10 years time, and the yield on that will supplement my rental income nicely.

 

[twobobsworth]

I'm also starting to focus on more yield-oriented funds now.

Which ones?

 

[hobo-jo]

Ha Ha
Thanks
Which ones (i.e. Newmont who bought thier hedge back some time ago) or..? Maybe the physical asset Gold/Silver
I know someone who did well during the GFC in their SMSF with Coins

I prefer to stick with mid tiers as per my post, Newmont is huge (largest gold m/cap on the ASX). I wouldn't even know where to begin trying to value a company like that to see if it's worth buying.

I hold around 10 gold/silver shares, SLR & TRY are my mid tier producers of choice (DYOR). Most of the others are juniors (explorers/producers), I prefer the small cap companies as there is potential for greater gains if you pick the right ones.

Physical isn't a bad choice either if you don't want to do the research into companies.

 

[willair]

I prefer to stick with mid tiers as per my post, Newmont is huge (largest gold m/cap on the ASX). I wouldn't even know where to begin trying to value a company like that to see if it's worth buying.

I hold around 10 gold/silver shares, SLR & TRY are my mid tier producers of choice (DYOR). Most of the others are juniors (explorers/producers), I prefer the small cap companies as there is potential for greater gains if you pick the right ones.

Physical isn't a bad choice either if you don't want to do the research into companies.

Hobo-jo,so you would be watching the high number of upcommingfloats that will hit the market over the next 16 weeks on the ASX,interesting to note the high% of Gold-Silver-and every other rock in the ground start up flash in the pan miners thatare in the list,maybe another bubble ..willair..http://www.asx.com.au/research/companies/floats/upcoming.htm

 

[hobo-jo]

Hobo-jo,so you would be watching the high number of upcommingfloats that will hit the market over the next 16 weeks on the ASX,interesting to note the high% of Gold-Silver-and every other rock in the ground start up flash in the pan miners thatare in the list,maybe another bubble ..willair..http://www.asx.com.au/research/companies/floats/upcoming.htm

Yes, I have seen an increasing number of Gold related floats. Not really surprising as Gold becomes more viable to mine at a higher price, mines/grades that were previously not feasible, become feasible. My gut feel is that Gold/Silver and related assets will head into a bubble, but we are far from one at these levels.