Wednesday 14 December 2011

Dividend Growth Investing for Beginners


Dividend Growth Investing for Beginners

Written by Tyler


When you, as an investor, are looking at income earning opportunities, you should definitely mull over the option of dividend growth investing. Dividends allow you to enjoy your share in the profit of a company on a quarterly basis. Dividends are the total amount of money that a particular company pays out to its shareholders. The amount of dividend depends upon the performance of the company and dividend growth requires that a company have a sustainable growth model. Remember, however, that dividend payments are not set in stone. It entirely depends upon the prerogative of the company to offer dividends to its shareholders, or not.
Dividend growth investing is an excellent strategy that you can use to maximize your cash income generated from your equity investments. In fact, if you can put in place a smart and consistent dividend growth strategy, you can replace the income from your regular job. Or, if you are in debt, you can utilize the dividend proceeds to become debt free.
However, to design a successful dividend growth investing strategy, you must have good knowledge of the dividend growth companies on the market. To find dividend growth stocks, you can check out the historical dividend performance of various companies on the Dividend Achievers andDividend Aristocrats lists.
Of course, past good performance does not ensure robust future performance. Rather, you have to select stocks which are fundamentally strong and which are undervalued at the current time to frame out a successful dividend investing strategy. Here are few tips so that you can find out successful dividend investing strategy.
Dividends are not rights but privileges
It is to be kept in mind that dividends are not guaranteed, rather they are more like privileges enjoyed by the shareholders. It depends entirely upon the discretion of the board of directors of a company to issue dividends to the shareholders, given the condition that the company has scripted a solid financial performance. Paying dividends to the shareholders shows the financial strength of a company and it also attracts income-minded investors to the company’s fold. Again, when a company cuts back the dividend amount, it shows that the company is not doing well.
Be skeptical about very high dividend yields
Do not expect to earn huge money with super-yield dividends. In fact as a general rule, any dividend yield which is over two and a half times the broader market, should be viewed skeptically. It has been seen time and again that many stocks fared exceedingly well and fetched super returns and dividends to the shareholders during the bull phase but plummeted appreciably during the bear phase, offering no dividends at all to the shareholders. This has been the case with many real estate investment trust (REITs), with their stock prices receiving a serious drubbing during the bear phase.
Analyze the cash flow statement
To find a high-dividend stock, it is important to analyze the cash-flow statement of a company. Check whether the company has the required cash to pay out the dividends or it is resorting to debt or selling stock to finance the dividend payment. If the company is selling stocks or resorting to debt to pay out the dividends to the shareholders, it can’t be a sustainable.
Follow the above mentioned tips to find out successful dividend investing strategy and to earn a lot of money.
This guest post is written by I Davis. She is the Community Member ofhttp://www.creditmagic.org/ and has been contributing her suggestions to the Community. She is quite knowledgeable of various financial matters like tracking down identity theft, money investment tips, credit card debt, credit card fraud and has a unique approach to analyze them. Check out her articles on various financial topics with special emphasis on ‘Credit’ related issues.

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Guinness Anchor Christmas cheer: Remember to Reinvest the Special Dividend



Investing is simple, but not easy.  Here is the rough calculation of the returns from Guinness for those who bought and held for the long term.
20.8.1992  Bought Guinness @ 4.38
13.12.2011  Guinness is trading @ 12.98
Investing period:  19 years
Capital gains:  8.60
Capital gains CAGR:  5.88%
Dividends paid in 1992:  36.4 sen  DY based on cost:  8.31%
Dividends paid in 2011:  54 sen  DY based on cost:  12.33%
Average DY over the last 19 years:  10.3%
Total average yearly return from Guinness = 5.88% (capital gain) + 10.3% (dividend) = 16.2%.

This is yet another stock that has returned 15% per year to its shareholders over many years consistently.


The total average return per year from Guinness = 16.2%.  
Let us translate this into CAG returns over the 19 year period.

Assuming the dividends were not reinvested into Guinness:
The total returns from this investment are as follow:
At end of 19 years, the 4.38 initial investment would have grown to 12.96.
The amount of dividend collected over the 19 years was 8.94.
Therefore, the initial 4.38 has become 12.96+8.94 = 21.90 over 19 years.
This gives a CAGR of 8.84%.

The DY of Guinness over many years range from 5.4% to 7.0% (average 6%).  

Assuming the dividends were reinvested at the end of each financial period back into Guinness and that theaverage DY was 6% for each investing year.
At the end of 19 years, the 4.38 initial investment would have grown to 41.60.
This gives a CAGR of 12.58%.

Assuming the dividends were reinvested at the end of each financial period back into Guinness and the DY for each period was the lowest of 4% for the 19 years.
At the end of 19 years, the 4.38 initial investment would have grown to 28.42.
This gives a CAGR of 10.34%.

.. and if you have bought GAB in Jun 2008 ...

Counter   Purchase Date   Price      Current Price       
GAB      04-Jun-08           5.35           13.14

Total % gain (excluding dividends)  145.6%.
This is a CAGR of 25.19% over 4 year period or 35% over 3 year period in its share price, excluding dividends.   Smiley


There are times when you can buy these great stocks cheap.  You will get fantastic returns over the initial few years of your "good timing pricing" in your investing.  Over the long period, the returns will attenuate to those of what the stock delivers over its long term.


(The above calculations of returns exclude special dividends.)

A surprisingly large part of the overall growth in most portfolios comes from reinvested dividends rather than in appreciation of the stock prices. A yield of 3% may appear small but over a period it makes a big difference. Choose some investments with a solid history of dividends and use them as the ballast in your ship.
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Wednesday December 14, 2011

Guinness Anchor Christmas cheer


Special dividend higher than last year’s full dividend
GUINNESS Anchor Bhd's (GAB) shareholders are getting some Christmas cheer when it came to light on Monday that the brewery will be disbursing a special single-tier dividend of 60 sen per 50 sen share for the financial year ending June 30, 2012 (FY12), which, notably, is even higher than its full-year FY11 dividend per share (DPS) of 54 sen.
If you were paying attention though, this would not have been a total surprise. StarBiz had previously reported in October that GAB's management was looking at ways to reward shareholders, a move not uncommon among cash-rich brewers.
A report by OSK Research analyst Jeremy Goh on Nov 29 had highlighted the possibility of a higher dividend, either through a higher payout ratio or special dividend. “In fact, we do not discount the possibility of a special dividend,” he said at the time, adding that GAB has a cash pile of RM164mil, or 54 sen per share.
In a follow-up report, Goh said that with the just-announced dividend, the DPS for FY12 would almost double from 61 sen to RM1.21, based on a 90% payout rate. This, he said, translated to a “very attractive yield” of 9.9%.
But in Malaysia's relatively small beer market where two players dominate GAB's latest move inevitably prompts the question: will its closest rival,Carlsberg Brewery Malaysia Bhd, soon do the same?
Carlsberg's shareholders might seem to think so. While both shares were on the top gainers list yesterday, with GAB adding 70 sen to RM12.98 and Carlsberg 31 sen to RM8.46, the latter's stock traded more than twice as heavily. As many as 469,700 Carlsberg shares changed hands versus GAB's 221,600 shares.
Analysts, however, are not counting on a bumper dividend from Carlsberg. As at Sept 30, it had RM82.7mil in cash and RM94.2mil in loans and borrowings as opposed to GAB, which had zero debt and RM164mil in cash and cash equivalents.
An analyst said that based on historical performance, Carlsberg's dividend payout averaged 50% to 70% against GAB, which paid out 90% of its earnings in FY11.
Nonetheless, Carlsberg did reward shareholders with a 58 sen dividend last year after it acquired Carlsberg Singapore Pte Ltd for RM370mil in the fourth quarter 2009.
Another analyst pointed out that while Carlsberg and GAB were fierce competitors, they had not been known to compete on the dividend front.
On the rationale for GAB's distribution of a special dividend, analysts said it was to optimise the brewery's capital structure. An analyst explained that GAB had to choose between making an acquisition or capital management, and since the choice of acquisition targets in Malaysia was limited, it opted to distribute cash to shareholders.
“Even when Carlsberg made an acquisition last time, it was in Singapore,” she noted.
GAB also recently proposed to issue RM500mil in debt notes for capital expenditure (capex) and working capital. Of the RM80mil-RM100mil capex to be spent in FY12, RM40mil has been apportioned to a new packaging line and RM30mil to upgrade its information technology infrastructure. The debt papers were given an AAA rating by RAM Ratings.
OSK's Goh, in his Nov 29 report, had also said that GAB was debt-free prior to the debt issuance, which raised its weighted average cost of capital (WACC) to 7.1%. The new debt notes, he said, would bring its WACC down to a more efficient 5.4%, assuming an effective tax rate of 25%, and the company's debt to equity ratio to 47:53.
On whether another extraordinary dividend was in the offing from GAB, its finance director Mahendran Kapuppial told StarBiz: “We do not have any plans for further special dividends.
“Historically, we have paid between 85% and 90% of our profit after tax as normal dividends to our shareholders and we do expect this to continue in the future. Looking at our current debt to equity ratio, the board felt that a one-off special cash dividend is appropriate.”


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Why Buy and Hold Will Always Be a Sound Investing Strategy

It seems like the debate regarding the merits of the "buy-and-hold" investing strategy is alive and well. We always find these discussions amusing, because we believe that it is such a pointless discussion. There is no general argument or case that can be made to support the buy-and-hold strategy or to negate it.

The only true answer to the buy-and-hold argument is it depends on what and/or when you buy-and-hold.

  • If you buy the right company at the right price, then buy-and-hold is a great strategy. 
  • If you buy the wrong company at any price, then the buy-and-hold strategy is a dumb move. 
  • Also, if you buy the right company at the wrong price, then buy-and-hold would once again be a bad move.


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3 Reasons You Must Invest In Dividend Stocks (Dividend growth investing)


3 Reasons You Must Invest In Dividend Stocks

Written by Tyler 

As a dividend growth investor, I am frequently asked why I don’t invest in high growth stocks and, more importantly, why I believe investing for dividends is a more appropriate strategy.
In bear markets there are great buying opportunities for dividend growth stocks that are offering yields above their historical averages.  Opportunities to buy great dividend growth stocks at above average yields is a great way to finance your retirement and increase the compounding effect of your future income from these stocks.
Here are the 3 most essential reasons that I prefer dividend investing: 
1.) Dividends offer investors fantastic flexibility.
Dividends give you tremendous financial flexibility throughout your investing life. While you’ve got an income from working, you can reinvest those payments to speed the process of compounding your wealth. Once you’ve decided to retire, the cash thrown off by dividends spends just as well as any other source of money!
What is even better, a rising dividend payment can help you fight inflation by providing you more cash every single year.
2.) You can’t fake money in your pocket. 
Dividends also have the added bonus of being exceptionally difficult for companies to fake. After all, it’s difficult to convince lenders to loan money to a company if that company is going to turn around and hand it over to its shareholders.
As a result, to sustainably make and increase those dividends, the business needs to generate serious cash on both a regular and repeatable basis.
3.) Dividends are paid from the company’s cash flow. 
Perhaps most important, a company’s dividend payment comes from its operational success and not from the panic, hype, or analyst interpretations that influence its stock price. Throughout these rocky market periods, dividend payments allow us to make money even when the stock price moves lower.
Why Invest In Dividend Paying Stocks?
  • Quicker compounding.
  • Increased financial flexibility.
  • Cash in your pocket without selling.
  • A hedge against inflation.
  • An check on the company’s accounting.
  • Cash Flow in a down market.
With all of the benefits of dividends, it’s obvious why they can be an integral component of one’s portfolio.
Did I miss any benefits of dividends?  If so, let me know in the comments! 

http://dividendmoney.com/three-essential-reasons-to-invest-for-dividends/
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Tuesday 13 December 2011

UK: No savings account beats inflation

UK:  No savings account beats inflation
Savers will struggle to erode the effects of rising inflation as there as the savings number of products dries up.

A sign warning of inflation
No savings account beats inflation Photo: .Keith Leighton / Alamy
11:33AM GMT 13 Dec 2011
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Today's inflation figures show that the Consumer Prices Index (CPI) fell during November from 5pc to 4.8pc.
In order to beat inflation, a basic-rate taxpayer paying 20pc would need to find a savings account paying 6pc per year, while a higher rate taxpayer at 40pc needs to find an account paying at least 8pc.
However, there is not a single savings account on the market that taxpayers can choose to negate the effects of tax and inflation whether it is CPI at 4.8pc or the Retail Prices Index (RPI) at 5.2pc.
The effect of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20pc, would have the spending power of just £9,210 today.
Sylvia Waycot, spokesperson for Moneyfacts.co.uk, said: "Savers continue to lose out to inflation even though the rate fell today. With returns so low and inflation unsteady, people don't know which way to turn."
A growing number of people are falling into an eroding spending-power trap which has already wiped nearly £800 off the spending power of £10,000 in just five years, said Ms Waycot.
"Over the last year the number of savings accounts that beat inflation for basic rate taxpayers has dropped successively from 57 to absolutely none, which must leave savers wondering why they save at all," she said.




http://www.telegraph.co.uk/finance/personalfinance/savings/8953110/No-savings-account-beats-inflation.html
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Singapore becoming 'less attractive' for expats


Singapore becoming 'less attractive' for expats
Singapore’s reputation as a destination of choice for expats in Asia has been hit by a triple whammy this month


Expats in Singapore are rejecting apartments in favour of landed properties.
Singapore is now a more expensive destination for expats than Hong Kong Photo: E.J. Baumeister Jr. / Alamy
By 
11:48AM GMT 12 Dec 2011
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Two measures by the government last week have made the city less attractive to non-Singaporeans – the biggest being a 10 per cent hike in stamp duty for any foreigner wanting to buy property in the city.
Stamp duty was only three per cent at its highest rate, so this move is seen as a strong curb to discourage foreigners from buying homes in Singapore.
Foreign purchases made up 19 per cent of all private property transactions in the second half of 2011. This compares to just seven per cent for the first half of 2009. Low interest rates, political stability and a strong economy have all led to a surge in property investment from wealthy foreigners.
Ku Swee Yong, chief executive at Singapore-based estate agency International Property Advisor, worries that “we leave foreign investors with a bad taste in their mouths.” He said: “Many foreigners are here to work and settle their families down and they need to own one home for shelter over their heads."
Last week the government also scrapped a scheme that lets graduates of foreign universities stay in Singapore for one year while they look for work.
The Manpower Ministry previously granted an employment pass eligibility certificate (Epec) to foreign university graduates in the hope to encourage high-calibre students to enter the labour force. But it said the scheme was not meeting its targets.
In the third setback for the city state, Singapore has also overtaken Hong Kong as the more expensive city for expats to live in – the first time this has happened in more than 10 years, according to the latest cost of living survey conducted by ECA International.
Within Asia, Singapore is now the sixth most expensive city to live in while Hong Kong has dropped to ninth. Tokyo is still the costliest location for expats.
George Hackford, a British expat who has lived in Singapore for more than five years, said: “From my point of view, I have seen 'real' inflation rise steeply in the past two or three years. This is mostly in the areas of luxury goods, which are often bought by expatriates.
"Rents have obviously increased substantially but so too have items such as alcohol, groceries and taxi fares. In general, prices of imported electrical goods such as computers and cameras have also inflated strongly. It seems to me that published inflation rates seem to be out of kilter with real prices.”

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Should investors stick with the winners of 2011?

Should investors stick with the winners of 2011?


The eurozone crisis has plunged many investors into a state of gloom. But some shares and funds have still made money this year. Are these the assets to hold on to, or should we look elsewhere in the new year?

Wimbledon 2011: Novak Djokovic has finally fulfilled of his his youthful promise, says Boris Becker
Novak Djokovic won his first Wimbledon title this year - but does past success mean future returns for investors? Photo: EDDIE MULHOLLAND
6:00AM GMT 12 Dec 2011
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With the euro crisis posing as many questions as Jeremy Paxman in an episode of University Challenge, it is difficult to know what lessons can be drawn from the past year's performance of funds and shares.
Almost all the world's major stock markets are in negative territory this year. Despite this, some funds and individual shares have done exceptionally well over the past 12 months. Is their performance likely to continue, and how are the experts rebalancing their portfolios?
Figures from Morningstar show that almost all the best-performing funds of the year are corporate or government bond funds. These have benefited from investor panic, with prices rising as people sought safe havens.
Baillie Gifford's long-dated gilt fund rose by nearly 22pc in the period – beaten only by Legg Mason's Japan Equity Fund, which has been boosted by a faster-than-expected recovery following the Japanese earthquake. Index-linked gilt funds also did well out of rising inflation.
Are these funds the place to be for the next 12 months? John Chatfeild-Roberts, who runs the Merlin funds of funds for Jupiter, said not. His advice came with a caveat: "If you had asked me a year ago I would have said gilts were too expensive, and I would have been wrong. They are even more expensive now."
He said that if you valued gilts and US Treasury bonds like shares they would look overpriced. "There's no long-term growth, and a price to earnings ratio of about 44."
Instead he urged investors to think carefully about the nature of risk when picking funds and stocks, given the situation in Europe. His Merlin funds hold a number of good performers from the past year, including star fund manager Neil Woodford's Invesco funds. Mr Woodford has seen his High Income fund gain around 11pc in a year. He holds cash-generating stocks including large pharmaceutical companies.
Mr Woodford said he was confident that by picking strong companies with sustainable earnings growth his portfolio would continue to thrive in 2012. "The increasingly tough economic outlook is not a surprise to me – I maintain my view that the developed world faces a prolonged period of low economic growth," he said.
"However, I also continue to believe that there are certain types of company that can thrive, delivering sustainable dividend and earnings growth in this environment."
Nick Raynor, an investment analyst at the Share Centre, is also banging the drum for defensive sectors. His research shows that the top performers this year come from sectors such as food, drinks and pharmaceuticals. "The majority of defensive sectors have held up well and are among the highest performers for the period," he said. "In 2012 we expect this to continue and the markets to remain unpredictable until the uncertainty with the eurozone is resolved."
The top-performing share for the year so far is Arm Holdings, which has risen by 46pc. The chip maker is doing well out of the fact that there is greater demand for mobile phones, and more advanced chips as phones get "smarter". Other top performers include Shire Pharmaceuticals, up by 43pc, which has made advances in market share and has been buoyed by takeover rumours.
Not everyone is confident that even defensive stocks are the answer. Douglas Chadwick of Saltydog Investor, a newsletter for those who control their own Isas and Sipps (self-invested personal pensions), said: "Wait for the market to confirm your opinions before trading. You've plenty of time to capitalise on a recovery."
His portfolio has risen by 7.2pc since its launch on November 23 2010. However, since last week, Saltydog has advised people to put 100pc of their money into cash.
But advisers agree that trying to time the market is an impossible task. Ted Scott, director of global strategy at F & C Investments, believes that those in cash may miss out on recovery.
"With each emergency summit proving to be more disappointing than the last, investors have lost faith in eurozone policymakers to provide a solution that will work," Mr Scott wrote in a research note under the heading "A great opportunity to buy equities will emerge".
"This has contributed to a collapse in investor sentiment with fear the overriding emotion in today's markets." But he added: "If a satisfactory solution for the debt crisis were to be found, the reversal in investor sentiment could contribute to a very strong and sustained rally." Equity fans can only hope that Mr Scott is right.


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