High dividend yield stocks

[rick62]

I believe they liquidated some really big loan books and returned a lot of capital to shareholders all at once as a fully-franked dividend. In fact they may have done this twice in two years, but I believe this is done and dusted. Yield obviously not maintainable for that reason. Lots of clever money could be made at the time, especially for SMSF holders, as I don't think the market completely understood the deal.

Thx Vesupria.. The yield is pretty much ridiculous so there must be other issues. I am in a SMSF but can imagine the current SP getting smashed once it goes XD. Seems very risky to me.

Appreciate your comments.

[Vesupria]

Thx Vesupria.. The yield is pretty much ridiculous so there must be other issues. I am in a SMSF but can imagine the current SP getting smashed once it goes XD. Seems very risky to me.

Appreciate your comments.

Have a quick flick through the 2012 Annual Report, they flag big declines in revenue / profit and obviously dividends will be affected. It's the old Rams Home Loans mortgage book from memory.

[rick62]

I think that's right but haven't they already announced a FF dividend of 10c to be paid next month? Something has to give surely - and what else other than the SP?

[Vesupria]

I think that's right but haven't they already announced a FF dividend of 10c to be paid next month? Something has to give surely - and what else other than the SP?

Yes - theoretically the share price will reduce by 10c per share plus franking credits.

[McLovin]

Have a quick flick through the 2012 Annual Report, they flag big declines in revenue / profit and obviously dividends will be affected. It's the old Rams Home Loans mortgage book from memory.

Yeah, worst timed float of the century according to the WSJ. They basically floated the business in 2007 and then within a few months had been shut out of lending markets because of the GFC so had no continuing business. RAMS was sold to Westpac so RHG is just the remaining loan book which is in run-off. They tried to sell the book but failed. I made a nice little profit on this.

[ROE]

Yes - theoretically the share price will reduce by 10c per share plus franking credits.

That the theory in reality if you know enough about certain stock you can play dividend
stripping game and profit handsomely.

RCG and RFG both went ex-div this week both stock price barely change in price.
RFG actually went up during the ex-div day but close 0.69% down...

I predict CAB will be going through the same thing depend when you buy the stock under 5.50 I reckon
it barely change if it goes ex-div

[Vesupria]

RCG and RFG both went ex-div this week both stock price barely change in price.
RFG actually went up during the ex-div day but close 0.69% down...

I hold RFG too, I noticed that. It all comes back to supply and demand, especially in stocks with lower trading volumes like RFG. Share price has done really well since they announced the Crust acquisition and 2012 results.

Definitely a good dividend yield too, so people interested in the subject of this thread may find it an interesting stock to research.

[ROE]

I hold RFG too, I noticed that. It all comes back to supply and demand, especially in stocks with lower trading volumes like RFG. Share price has done really well since they announced the Crust acquisition and 2012 results.

Definitely a good dividend yield too, so people interested in the subject of this thread may find it an interesting stock to research.

Another stock went ex div today 5.5c and it stock jump 2.5% CDA.
I have CDA
CDA could be classified as a high yield stock depend when you bought it, under the radar for a while
it should get more attention in the next 2 years when it show you the money

[Vesupria]

Another stock went ex div today 5.5c and it stock jump 2.5% CDA.
I have CDA
CDA could be classified as a high yield stock depend when you bought it, under the radar for a while
it should get more attention in the next 2 years when it show you the money

I actually looked at CDA last year when it was at a similar price. I don't know much about metal detectors and radio communications and the people who buy them, so I didn't go too much further. But I remember the financials being pretty clean.

[hesking1]

Thx Vesupria.. The yield is pretty much ridiculous so there must be other issues. I am in a SMSF but can imagine the current SP getting smashed once it goes XD. Seems very risky to me.

Appreciate your comments.

RHG was one of the worst IPOs of the century. Floated at $2.50 or so then promptly went to 5c. It was a mortgage broker and servicer with a loan book of generally low to middle-income residential housing - all dirty words in the GFC fallout.

The reason RHG traded so low was that there was a fear about the quality of its loan portfolio. Westpac obviously saw some value in the business because it bought RHG's business in 2008 however the mortgage book was left in the listed RHG and from then has been in "run-off". So buying RHG has meant betting that the loans it originated would be paid out. The difficulty in trying to figure this out has not only been RHG's generally low-doc mortgage book but the obstinance of management who have been famously anti-shareholder.

I was lucky enough to come across RHG when it was ~40c in 2009 and figured that paying ~$100m for a $2bn mortgage book was a pretty good deal (easy to say in hindsight of course). John Kinghorn, who had spectacularly sold out when the company listed, had done much better and rebought many of his shares at 10c! He then lodged a takeover of the company at ~80c. Some fundies who had positions got together and blocked the takeover pointing to the value still left in the company, whereupon Kinghorn promptly said the company would pay out all remaining cash flows as dividends, starting with 80c (ie pretty much what he offered for the whole company) and he sold out at $1.20. Talk about taking the punters for a ride! Sell out, wait for bargain prices, then sell out again..

Everyone thought the story ended there but after that initial big dividend after which the SP dropped to ~40c, RHG has continued paying out dividends at differing but very high rates (10c, 15c) every half while the SP has remained steady. Commsec's figure is probably understating the yield. Of course the question is when will the music stop because there is by definition no growth in this company - it is in fact very much like a bond because all you have is a defined number of future cash flows (mortgage repayments). But unlike a bond there is no payment of principal at the end - there is only cash flows. In other words it is not much good getting a 20% yield if you lose all your capital at the end of the year..

ps There may well be value left in RHG but I have not found enough information - or am too lazy - to try and work that out. I no longer hold but was there for quite a ride!

[skc]

RHG was one of the worst IPOs of the century. Floated at $2.50 or so then promptly went to 5c. It was a mortgage broker and servicer with a loan book of generally low to middle-income residential housing - all dirty words in the GFC fallout.

The reason RHG traded so low was that there was a fear about the quality of its loan portfolio. Westpac obviously saw some value in the business because it bought RHG's business in 2008 however the mortgage book was left in the listed RHG and from then has been in "run-off". So buying RHG has meant betting that the loans it originated would be paid out. The difficulty in trying to figure this out has not only been RHG's generally low-doc mortgage book but the obstinance of management who have been famously anti-shareholder.

Great summary. I looked at RHG in great detail and worked out a value for the run-off scenario which was much higher than the share price at the time. However, the biggest problem was not only the quality of the loan, but also whether the two loan warehousing facilities they had would be extended. They were due in 6 months and if those facilities didn't get extended, RHG would lose the loan book to the facility provider - and shareholders would get none of the cashflows.

It was a risk that I just couldn't take, or even if I did it would have been a small position that assumed 100% loss.

[tinhat]

Another stock went ex div today 5.5c and it stock jump 2.5% CDA.
I have CDA
CDA could be classified as a high yield stock depend when you bought it, under the radar for a while
it should get more attention in the next 2 years when it show you the money

CDA was on my watch list a while ago - perhaps in 2010 - and looking back over its fundamentals I can see why - it had a stellar EPS growth rate there coming out of the GFC. Haven't looked at if for a long time and I see that its going sideways and I also see that consensus forecasts are for no growth in earnings over the next couple of years. Not knowing anything about this company - what is it up to that is going to be showing money in a couple of years?

At first glance it looks like a bit of a yield trap - and I've got enough of those in the SMSF at the moment - a lot of good divi payers with no earnings growth. Sign of the times?

[systematic]

I don't usually look at dividends at all, but had just been doing some work on them this morning. Came across this thread, so I thought I'd post for interest.

I looked at:
Forward dividend yield estimate of 5%+ (that was arbitrary) and not less than previous yield.
Growing sales and earnings per share.
Reasonable debt levels and a good score on general financial criteria.
I also looked for reasonable value - no sense paying too much. Momentum column was simply added for interest.

Might be some ideas for someone's research (invest at your own risk!). Bold are simply those in the ASX300.


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