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What dividend yield is acceptable to you?

Discussion in 'ASX Stock Chat' started by Tyler Durden, Jun 12, 2011.

  1. Tyler Durden

    Tyler Durden Well-Known Member

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    Assuming you are looking at some shares to hold onto for the long term and want stable dividends, I am curious as to what dividend yield would be acceptable to you?
     
  2. So_Cynical

    So_Cynical The Contrarian Averager

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    I have 1 stock that doesn't pay dividends and never will, i have a few others paying over 12% (on original capital invested) and a heap more stocks paying between 4 to 8%.

    Dividends and distributions are a core part of my overall investment strategy...current return on current portfolio value is about 5.9%
     
  3. Tyler Durden

    Tyler Durden Well-Known Member

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    Hey thanks, so that's your current return, but I'm just saying, when you look at a stock, what dividend yield would be the acceptable level for you? If you were thinking about buying a stock, and saw it had a 4% DY, would you buy it (assuming it fit all your other criteria)? 3%?
     
  4. So_Cynical

    So_Cynical The Contrarian Averager

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    I don't have a minimum or maximum figure..i invest in stocks that i believe have a high potential to pay dividends and increase dividends payments going forward.

    My lowest dividend paying stock at the moment would probably be TRY currently trading at about $3.60 and just paid a 4 cent divi, so a gross yield of around 1.4% ~ so obviously i don't hold this stock just based on yield, and would say the same about all my holdings.
     
  5. tothemax6

    tothemax6 Well-Known Member

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    Wouldn't ever buy based on dividend. Indeed, whenever I see high dividend yields I am immediately suspicious that I should not buy (for the same reason one should be wary of a bond with high yields).
    In my opinion any stock investment strategy should be based on the broad fundamentals of the company, the economic fundamentals around that companies business (e.g. commodity inputs and outputs), and macroeconomics (e.g. don't buy stock regardless of the companies fundamentals if equity is about to lose value in aggregate).

    Good dividends follow good fundamentals, they do not lead them.
     
  6. tinhat

    tinhat Pocket Calculator Operator

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    I should be more focused on dividends; most of the funds in our family SMSF are in pension mode (tax free) because the member with the most money in the fund is now in pension mode. Thus, if the franking is 100% the effective dividend becomes the paid dividend times 1.43 once the franking credits are added back in.

    I haven't been focused on dividends - not with commodities running hot. I'd rather have money in a BHP yielding 2% but with strong internal investment into good growth prospects over the medium term than in WOW with lower growth prospects, but yielding around the 4-5%. So, I don't chase dividends. I don't have a problem with selling shares to release cash when needed.

    I think the current sideways market is a good indicator of what can be achieved with a diversified portfolio with a spread of risk between income, blue chip and more speculative and more growth oriented. I have a bias toward growth oriented regardless of dividend.

    I seem to be able to make a 10% accumulative return on this sideways market, and that includes making a lot of mistakes, some irrational decisions, and some bad timing; but includes what I consider to be a measured spread of risk.

    When you can get 6.4% at call on bank deposits, 7% on medium term deposits, I think 10-12% return on the stock market is a reasonable return on risk to require for someone who actually needs to be generating income to live from their investments.
     
  7. Tyler Durden

    Tyler Durden Well-Known Member

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    I was just reading an article from here, and it said:

    When I read that, I thought "what the hell?", I can't find any company (apart from those dodgy real estate trusts which I know nothing about) that pays 17% dividends. Are they taking amateur investors for a ride??
     
  8. stacks

    stacks Well-Known Member

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    Bit scary that article was published on June 4 2008.... not the best time to 'borrow to invest'
     
  9. Tyler Durden

    Tyler Durden Well-Known Member

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    LOL! I didn't even catch the date, silly me.
     
  10. tothemax6

    tothemax6 Well-Known Member

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    If you are interested in a fixed income, perhaps you would be more interested in corporate bonds. There is a 'hybrid securities' thread here where people discuss these high-interest instruments.
     
  11. Noddy

    Noddy Well-Known Member

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    4% Franked minimum, otherwise would leave my money on fixed deposit at the bank at 6% and forget about it.
     
  12. Tyler Durden

    Tyler Durden Well-Known Member

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    Verrrrry interesting indeed...thanks :)
     
  13. Julia

    Julia In Memoriam

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    Does this blanket statement include a stock which is showing 20%+ capital growth p.a. but only has a yield of 2%?

    I'm totally puzzled by the title of this thread. Simply don't see how you can consider yield as a factor on its own, without taking into account the growth (or otherwise) prospects of the share.
     
  14. skc

    skc Well-Known Member

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    Yes... it's a bit like asking "What fuel consumption is acceptable to you when you buy a car?". When that is really 1 of many factors to consider.
     
  15. McLovin

    McLovin Well-Known Member

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    The best companies are those that can take profits plough it back into the company and generate the same incremental return on capital. Berkshire Hathaway has only ever paid one dividend, but you'd look a bit silly if you said you wouldn't buy it because of it's dividend policy.
     
  16. Noddy

    Noddy Well-Known Member

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    According to today's newsletter from the bull -
    www.thebull.com.au

    Over the past 5 years, returns on the ASX200 have been -

    Return from dividends +5.04%
    Capital growth -0.87%

    Why wouldn't consideration be given to dividend yield when choosing aa investment ?
     
  17. Julia

    Julia In Memoriam

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    No one has suggested no consideration be given to dividend yield when choosing an investment.
    It has simply been suggested that it's a nonsense to make this the sole criteria which is what the thread title implies.
    i.e. if you say "this stock has a yield of 5%, therefore it satisfies my requirement for an investment" and fail to consider other factors, then I wish you luck.
     
  18. Kryzz

    Kryzz shaun

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    Presumably they would have neglected to mention the fact that div yield and price have an inverse relationship to novice investors; Trying to produce positive figures by comparing it capital growth figures, in a time which has been marred by the advents of such years as 2008 and onwards.

    Case in point, Telstra, div yield was a little over 1% about ten yrs ago, now it's up over 4.5%...pity about the >60% capital loss over time.
     
  19. Boggo

    Boggo Well-Known Member

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    Kryzz, a point that is rarely understood, this is an issue that overlaps into the buy and hold thread elsewhere on here.
     
  20. Tyler Durden

    Tyler Durden Well-Known Member

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    I did say "assuming it fit all your other criteria" at post #3.
     
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