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