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Low yield stocks (e.g. CSL) for long term investment

Discussion in 'Beginner's Lounge' started by paulahb, Apr 6, 2013.

  1. paulahb

    paulahb

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    I am looking to buy shares for long-very long term investment. Eventually I imagine that I would like to live off the dividends.

    Should I even be looking at low yield stocks now? It looks like over the last 10 years CSL has performed well every step of the way. But their yield is low.

    The problem that I see is that if I hold this stock for a long time and then sell it then I will be up for a large capital gains tax bill (even with the 50% discount).

    What are the pros and cons when considering low yield vs high(er) yield for a long term investment?

    Thanks,
    Paul
     
  2. ROE

    ROE

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    You are assuming past performance lead to similar future return...there is no such thing in the stock market.....
    CSL is a well run company but you got to do the research at what price you need to pay in order to get the reward going forward ....when you buy a stock you buy for its future not its past.....

    some stock can be down right shonky in its history but with the right structure and people in place going forward can be rewarding..
    take WOW for instance its has a shonky past and nearly went bankrupt....with the recap in place and new management...it deliver crazy return for its investor ever since....and vice versa ..Take MQG it was great before the GFC ...return on equity is superb, it make money left and right and do everything right....market going to celebrate it going to be the first stock reaching $100 when it was trading $80 ...you bought MQG at time you are now down more than 50% with the possibility of never get back to $80 mark....

    There is no clear distinct advantage between low/high yield stocks, many variables come into play...
    stocks ditch out low yield is it because it need the capital to grow or maintain the business....stock ditch out high yield does it mean it cant use the money to expand further or its business model so good it doesnt need much cash to expand etc...etc...

    but if you invest long enough you know why certain business cant ditch out high yield, most mining companies cant...because of its
    high capital structure...it need the cash to replace capital heavy equipment and expanding mines....but a guy like CBA or CCP
    can because it doesn't need much money to expand and run the business...its cash flow and available of credit market is all its need to expand and prosper...


    there is a possibility in the next 10 years CSL go no where or even lose you money at the current price...
    I'm not saying that it will but that is the possibility so you got to research and be comfortable with the price you pay...
     
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