Falling Share Price Impact On Dividends?

“We had a bad 2007 which followed a bad 2006”


I wonder how anybody (including B.Miller) could have a problem during a strong bull market 2006/2007 - if DOW at that time was strongly trending up
(see chart below).

 

Underperformed does not equal lost money, Tropo. It probably made a good amount, just not better than the index.

Let's not discount the US $47 billion under management. Some people reckon he knows what he's talking about.

 

"Some people reckon he knows what he's talking about."

Are you one of them?

 

No, but I wish I was.
I'll take 15 years out of 17 at better then index performance, any day.

I suppose Warren Buffett is a bozo too, since he is holding his stock through this period?

Are you shorting the Australian banks at the moment?

 

Tropo, we both have our obvious views on how to make money in the sharemarket. Yours is trading, mine is investing.

We are both happy with our strategies, so let's get on with life.

(Having said that, I'm still interested in your answers to the questions above!)

 

It seems that you believe in all what you are reading.
Guess what....W.Buffett is selling from time to time.

I am shorting $US at the moment.
Shorting banks was a good strategy up to last week.
Wait for another opportunity. Just be patient.


"We are both happy with our strategies, so let's get on with life."

If you are happy with your strategies – so am I.

 

Well the forecast '08 dividends for the 5 banks have fallen since the original post, but only by a couple of cents per share. I picked up some more SGB to lower my overall cost basis to $23, which at the current forecast is over 7.9%FF dividend. It's also a 40+% reduction on the peak price of $38.50 last year. Also picked up some NAB for good measure as it's paying the next highest dividend and also sustained large falls. Happy to hold both these stocks long term, and will increase my holdings the further they fall in the short term. I personally don't see the "view to a kill" or "don't catch a falling knife" viewpoints eventuating for these companies, and if I'm shown to be wrong, the small losses I'll suffer directly will be immaterial to the overall impact to the Australian economy and public in general. Time will tell...

 

Hi JustB,

I've been eyeing out SGB as well, the dividend yield is now the same as their 11 month term deposits! Though fully franked with upside potential on the share price!

Cheers,

Dan

 

I read the tanks are seen as the traditional 'flight to safety' vehicles for the ASX. And I recently heard one fund manager mention this same idea for his current portfolio holdings.

Strikes me as an interesting concept when the danger you are fleeing from is a credit crunch! Things can work very well in the markets, until they stop working. You wanted to flee to gold and sin stocks in the 1920's, definitely with a capital D not to financial sector vehicles. Perhaps it's been different every time since then?

Having said that the financial sector might very well be a bargain now or at some point in the future, still plenty of brave (much braver and more money than me) people buying Citigroup in the US markets, good luck to you sirs!

What on earth is the rush? Who has studied history here and actually gone back and looked at a few charts to see what happened with stocks in bear markets, bear sectors and how they recovered? If you are buying a stock with real hard earned I would be doing a lot of digging first.

Why not wait till all the charts return to normal, has anyone seen the 90 day bank bill chart recently and the tanks cost of funding? That doesn't concern you? And you want to be buying banks at a time like this? Could be a great time, really could, but if it was me I would be leaving a bit of the recovery profit on the table before buying into these hot potatoes at the moment.

 

Another point to consider is that the talk is about dividends in the current interest rate environment! What if we end up with a 12% interest rate, then a 7% dividend isn't going to look so crash hot.

Cheers

 

There are a few reasons why I personally have no dramas buying banks at the moment...

1) I haven't invested anything I can't afford to lose (yet).
2) The banks so far are covering their costs of borrowing - my margin loan rate just went up 41 basis points (though my margin loan LVR is <10% and I haven't drawn down funds to purchase bank stocks....yet).
3) I believe the forecast dividends will come to fruition without substantial downgrading. And at current levels, why wait? Even if borrowed funds were invested, the dividends and franking credits would cover the interest payments and then some.
4) I'm in it for the long term, so not bothered if the share price drops another 10%, 20%, 50% in the near term, as long as it grows above CPI in the long run, and pay dividends along the way.
5) The old adage of risk vs. reward - and given there hasn't been a period where bank shares have lost over 40% of their value in such a short time-frame, I think the risk of them dropping further is outweighed by the reward of them recovering to previous highs and beyond.

But I also acknowledge I am a complete novice, and certainly enjoy reading all opinions on the subject matter.

JustB

 

Well said JustB.

Try and focus on your risk as you can control that while the upside has to take care of itself.

We are all beginners before Mr Market!

 

I am definitely will be buying more banks, just waiting closely for the price to stabilise a bit. I have 3 major banks, the one that I don't have is CBA that I'll be buying next.
I will also look into buying SGB when I think is appropriate.
Like what we experience before and will experience again, sentiment change like seasons.
When it comes to buying share now days I don't use a complex calculation, simply I am happy to buy the whole company (if I can) then I should buy the shares.

Like Rod_WA I am an investor and in it for long term.
I have done years of trading when I was younger.