Rents underpin property values
- Thread starter mrmonopoly
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Some funny comments from LoanMarket chief operating officer Dean Rushton in an article today:
What dreamland is he living in??
Read more: http://www.news.com.au/money/proper...rs/story-e6frfmd0-1226058965399#ixzz1Mq4lFRUT
What dreamland is he living in??
Thats true, people love their divs. And at your investing stage, you would love divs.
But not all companies fed profits back to management. Look at Berkshire Hathaway for one. It feeds profits back in for acquisition and look at the share price now. Amazing. I'd prefer that to divs any day.
http://www.google.com/finance?client=ob&q=NYSE:BRK.A
Then again, there is only one Warren Buffett.
But not all companies fed profits back to management. Look at Berkshire Hathaway for one. It feeds profits back in for acquisition and look at the share price now. Amazing. I'd prefer that to divs any day.
http://www.google.com/finance?client=ob&q=NYSE:BRK.A
Then again, there is only one Warren Buffett.
American companies do it most because cap gains get favourable tax treatment and News is listed in NY. I have a problem with this because it encourages the board to take risks in acquiring other companies.
But in the end, if a company never returns funds to the shareholders via divs or "special" divs, it should be dismantled and the "scrap" value returned to them. Mining companies are shockers at only paying management which is why conservative investors hate them, and I don't blame them. (Yes I do understand IV, but I like cap gains as much as anyone) BHP s/holders would have appreciated some div return instead of wasting a qtr bill on failed take-overs.
You guys are taking me too literally. I am trying to present a concept. The idea is that NOTHING can continue to grow, be that populations of rabbits or lemmings (or indeed people) or businesses. Microsoft never paid a div for many years but early investors became millionaires. Latecomers bought into a company with nearly $100 bil in the bank but which had lost momentum and therefore lost stock price. They eventually paid a special div but too little, too late. Early investors made cap gains it's true but I can see no reason, other than a short term trade, that one should hold this stock. That cash in the bank should have been returned to the share holders.
BHP is returning a pathetic dividend and they can waste money like no other company (OK, so too RIO) I know. A mature company should pay dividends because the boards are too easily tempted to waste profits on growth which mainly feeds their bonuses and egos.
Watch this series of vids to get my drift:
http://www.albartlett.org/presentations/arithmetic_population_energy_video1.html
Fosters and Coca Cola and a great many more are guilty of playing corporate games at the expense of the share holders.
BHP is returning a pathetic dividend and they can waste money like no other company (OK, so too RIO) I know. A mature company should pay dividends because the boards are too easily tempted to waste profits on growth which mainly feeds their bonuses and egos.
Watch this series of vids to get my drift:
http://www.albartlett.org/presentations/arithmetic_population_energy_video1.html
Fosters and Coca Cola and a great many more are guilty of playing corporate games at the expense of the share holders.
Warren Buffet doesn't pay dividends because he's good enough that he can re-invest for a bigger profit. Coca Cola isn't a cement box on a patch of dirt, it's a company that's trying to capture China, India, and other expanding markets. It doesn't need to pay dividends if winning new markets will create much larger future dividends. That's why Warren Buffet reinvests.
Unless you expect that your cement box on a patch of dirt is going to conquer another continent, there's no reason reinvest dividends to pay for expansion. OK, you need to pay for maintenance, and sometimes a "fixer-upper" might be a good deal, but most of the time you want cold hard cash.
Most years, rent minus expenses a good indicator of what a place is worth.
Precisely.
In my opinion the 'secret' with these big businesses is to treat the earnings like a bond.
Coke has managed to grow its earnings very nicely over the last 10 years, so has microsoft. Not fast, but at a reasonable pace (say around 5-15% a year, with an average of say around 7-10%). all ball park figures.
So then the time to acquire these shares are when they are paying a high earnings yld (ie low PE), hold them until the market suddenly desires them, and then offload at a higher PE.
Doing this one can capture both the PE expansion (yld compression) and the additional earnings growth.
But it requires patience, diversification amongst a number of these types of stocks (some will work, others wont over time).
Using these strategies, one can achieve a reasonable total return, but that return is mostly driven by timing, rather than just buy and holding forever.
You're not listening!!!!!
"Earnings" have value for the shareholder IF and ONLY IF they are returned. All rising star companies lose momentum. Once they do their PER drops and you can cop significant cap losses on a still profitable company. If they have not returned "real" money to the shareholders BEFORE they fade, why would you want to own them?
Someone mentioned DCF. I, personally, don't do it but only because I play with companies where any return is still years away. Besides, there are far too many variables to get deeper than "back of envelope" stuff. But if your ear is to the ground, it can work.
Where you and I differ is that I know, absolutely, that I can't match Buffett any more than I can match Thorpy in the pool. Know your limits is my motto.
You're not listening!!!!!
"Earnings" have value for the shareholder IF and ONLY IF they are returned. All rising star companies lose momentum. Once they do their PER drops and you can cop significant cap losses on a still profitable company. If they have not returned "real" money to the shareholders BEFORE they fade, why would you want to own them?
Someone mentioned DCF. I, personally, don't do it but only because I play with companies where any return is still years away. Besides, there are far too many variables to get deeper than "back of envelope" stuff. But if your ear is to the ground, it can work.
Where you and I differ is that I know, absolutely, that I can't match Buffett any more than I can match Thorpy in the pool. Know your limits is my motto.
You are correct in that as a company grows larger it becomes increasingly harder to maintain the fast level of profit growth that can be achieved with, as you put it, a 'rising star'.
But creation of shareholder 'value' in the terms you put it, does not cease once a company moves from small to large.
There are two components to the 'value' of the share:
(a) the underlying future performance of the company and
(b) the price paid for a share in the company.
The return to the shareholder will be the interrelationship between (a) & (b) plus any dividends paid out.
Using the example you provided, if a company goes from rising star to fading big cap without ever providing a distribution, and eventually goes into bankrupcy then obviously the 'value' of the share is just its break up value.
But not every company goes down this pathway.
In regards to Buffett, the stuff he advocates is not hard. But it does take a certain mindset.
Maybe my mindset is better attuned to Buffett type investments whilst yours is better suited to PM plays.
One doesnt have to be right, for the other to be wrong
Thanks for the warning, Considering Buffett has only paid one dividend you would sort of hope for a bit of capital growth.
They key with companies that pay low dividends is can you trust management to intelligently reinvest the companies earnings.
Buffett has achieved what he has because he is a master of his craft. They guy is unique, dont expect normal 'companies' to achieve anything of the sort because they hold all the funds.
Well that's because Buffett runs his company like his own business. Most listed companies keep a sticky dividend because it's a 'signalling' tool. Reducing/Increasing dividend sends signals to the market - and management must keep the facade even if it isn't a prudent decision for the company itself.
good point, its definately one of the risks. There is far too much time spent on managing 'expectations' than managing the companies. But then managment get rewarded based on performance against 'expectations' and maybe there lies part of the problem.
Spot on. They spend more time going to investor roadshows, presentations etc than actually running the business! It's ridiculous.
but whos fault is it? who gets remunerated based on what factors?
Its a game out there, but the important relevance in my opinion is to know that its game, and hence dont get sucked in.
You're not listening!!!!!
"Earnings" have value for the shareholder IF and ONLY IF they are returned. All rising star companies lose momentum. Once they do their PER drops and you can cop significant cap losses on a still profitable company. If they have not returned "real" money to the shareholders BEFORE they fade, why would you want to own them?
Someone mentioned DCF. I, personally, don't do it but only because I play with companies where any return is still years away. Besides, there are far too many variables to get deeper than "back of envelope" stuff. But if your ear is to the ground, it can work.
Where you and I differ is that I know, absolutely, that I can't match Buffett any more than I can match Thorpy in the pool. Know your limits is my motto.
Well one's ear must be to the ground like god's to be able to forecast, for example, thermal and semi-soft coking coal prices in two years time and A$/US$ exchange rate too. Not to mention forecasting the same in subsequent years.
In the meantime I think I was just asked to build another DCF to convince some person that they should spend $1bn buying something. Ps: that's where the co profits you're investing into are going, buying things off the back of some DCF
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