Dividend growth investing

[umbrella]

@Nickobud Here is a link to a possible portfolio sorted by dividend streak. https://www.dropbox.com/s/0rqanpc7rnd8pg2/Growth Filter.jpg?dl=0

The filter is;
5 years CAGR EPS >5%
5 years CAGR DPS >4%
ROE >12%
Yield >1.2%

 

[Belli]

SOL (WH Soul Patts)

• This year we will pay out as dividends, 82% of the net regular cash inflows from operations.

I hold 7,000 of these in my personal name. Last time I added was 2011. While a steady dividend payer I decided it was replication as the LICs I hold also hold SOL and the most of the other companies in it's portfolio and so does the Index.

Always considered the payout ratios of all my holdings a bit high. That said, if the company cannot find a productive use for the cash I prefer it's in my hands rather than have them do something stupid -

- Woolworths = Masters
- BHP = Magna Copper,
- etc.

There are two other issues which make me think. The first it does appear it is has a touch of being a Fund of Fund taking various positions in companies such as Pengana although to be fair via Pengana it did get a slice of Hunter Hall on the cheap I feel.

The second is succession. While I never held it I have heard URB wasn't the roaring success it was hoped to be but then not all endeavours are successful and there was according to reports some shareholder stress with the way BKI did a capital raising. Not any idea of what that portends for the future but it is interesting to me.

I don't use any sort of dividend filter to "chase" payers. Yield goes all over the place depending on the price. I simply want to compound my income stream by placing as much as I can afford back into the share markets.

 

[Dona Ferentes]

a poorly written article that has a few truths

The two best ways to maximise dividend income

People often marvel at Warren Buffett now getting 60 cents in annual dividends on every dollar he invested in Coca-Cola 30 years ago. What’s often overlooked are the secrets to how he achieved this phenomenal result.

www.firstlinks.com.au

 

[Country Lad]

I understand you thinking with yield on invested capital, but more realistic is to consider what the yield is on the capital you would end up with after tax if you sold. That way you can compare the opportunity cost of continuing to hold.

It may well be that its better to hold even with a comparatively low yield because of the tax cost of selling and the problem of finding another company to invest in.

I am always very reluctant to sell out of a great business, its often fool's gold to sell down or out of your big winners, but I do think its an error to think of yield on invested money, its a similar cognitive error to the idea of "free carry".

I have posted the reply here because it doesn't really belong in the CSL Thread

People will look at long term holds, yields, opportunity cost etc quite differently depending on their circumstances, what part of their life currently, their requirement for the future and of course their age.

I have discussed my (very) long term holdings previously and my views would differ substantially to many of you who are half my age. For example, the CSL shares I acquired when they listed are simply a nice dividend income for me. However for those still building their capital the money from the sale would best be utilised (let’s ignore the capital gains issue) for stocks with higher growth.

Except for those long term holds, I was constantly chasing shorter term gains when I was in my 30’s and 40’s went to more safety in my 50’s & 60’s , when I started being strict on stops.

Now my trade can be defined as playing and keeping me occupied. Long term obviously is totally irrelevant in my current trading. Those stocks I still have from my very early days are simply there to sell when Country Lass wants to go on a spending spree or for life style stuff.

At this stage the capital gains is irrelevant – it is simply a case of having to be paid sometime regardless of I, or at a later date Country Lass or the kids sell them.

We no doubt ask (or should ask) ourselves at various times “what stage of my life do i fit in and should that change my investment strategy and mindset.

So it is logical that there will be many varying views on investment strategies and each will likely be appropriate for the individual.

 

[Ferret]

At this stage the capital gains is irrelevant – it is simply a case of having to be paid sometime regardless of I, or at a later date Country Lass or the kids sell them.

Interesting take @Country Lad .

To my mind, CGT having to be paid at some time makes capital gains very relevant.

For example, I have CBA in a testamentary trust that were bought by my father. These have a very low cost base.

I can see that CBA is overvalued, but the CGT to be paid if they were sold is very high, so I hang onto them and enjoy the dividends.

I feel I have a duty to maximise the capital of the trust and pass this on to the next generation. The trust structure allows this by delaying CGT for up to 80 years.

 

[qldfrog]

I really have an issue with this "i do not sell because the capital gains are too high..."
There are circumstances justifying delayed or slow decreases:
i already sold an ip , am already at max tax rate and from july i have no high taxable income..sure delay if you can ..
Look at FMG
I bought some at $13 last week, was at 30 early 2024 , extreme but basically fair to say you have a 50% fall from overvalued to back to proper valuation
How on earth can it make sense to keep to avoid CGT which anyway is just taxed on half of gains?
To go fictional
So you buy shares at 1c 15y ago..in the current cgt regime, they are worth $100.01 widely acknowledged as overvalued, and not in growth mode anymore
They provide you at most $3 (3% dividends plus benefits) which is income
You sell today, you get 100 minus 50% tax rate ..worse..on 50$ reduced capital gain
In your pocket $75 net
sure you gave the ato $25
Put that money in an index etf..VAS so the overvaluation of specific stock is removed
You get 3.7% returns or $2.78 dividends roughly same $3 after franking etc
Have more opportunities for growth
End result:
75$ assets with growth opportunities, same returns, no tax liability
You gave $25 to ato

If you sell that out of growth asset after it crash back to reality:
You sell at $50, you pay the ato $12.5
You reinvest $37.5 in VAS
Get $1 returns
End results
$37.5 assets, a third of the returns, no tax liability
You gave $12.5 to the ato....
Lame

You keep your shares:
$100 assets, tax liability
3% return, no growth opportunities, higher risk

The lazy option sure but not the wise one.
the worst taxation cost is 25%
Even wo taxation liability,wo growth factoring , you are always better off selling and re buying the same stock after 25% fall and imagine the extra dividends

So CGT is hardly relevant, what is relevant is:
Do you see the given stock as overvalued?
If the answer is yes sell, otherwise keep and be logical with yourself, add more.
Note: remember we are NOT talking growth stock where sky is the limit
Not FMG 10y ago or google etc.

 

[Ferret]

You make a good case @qldfrog . Selling is something that I need to work on.

Part of my problem is I have difficulty identifying when to sell. I did sell some CBA a few years ago for around $100 and have regretted it.

 

[qldfrog]

You make a good case @qldfrog . Selling is something that I need to work on.

Part of my problem is I have difficulty identifying when to sell. I did sell some CBA a few years ago for around $100 and have regretted it.

A few years ago...
Remember inflation. So you sold at $120 2025 aud, and you have invested that money since, gave you more opportunities.. does not mean it worked but gave it a try

 

[rcw1]

You make a good case @qldfrog . Selling is something that I need to work on.

Part of my problem is I have difficulty identifying when to sell. I did sell some CBA a few years ago for around $100 and have regretted it.

rcw1 dont concern oneself no more about that... win some lose some but most importantly you made a profit m8, well done, make millions bloke and get a rum into ya

Kind regards
rcw1