Very true. After the IPO, the only relevance of SP to the board, are bonuses
Naturally - I want the companies I get dividends from to be around for 20 or more years and thus keep my capital intact and in pace with inflation at least.
I should have been clearer.
I find it difficult to get an income from companies that do not pay dividends but show capital growth - I struggle both with the concept and with the practicalities.
Conceptually - if I sell shares to realise part of the growth I am eventually left with no shares.
Practically - selling small quantities makes the trading cost horrendous (and I have to take decisions and carry out the trade.)
I do wish II would reintroduce dividend pay away.
Are investors at the IPO stage not speculators too? Speculation does not differentiate initial investors, trading investors or longer term investors.
When I buy their IPO shares I become them, my cash becomes theirs as far as the company is concerned. Hopefully, they get a little or a lot extra from me for taking the initial risk. Thus part of my money indirectly funds the plants etc, and part rewards the IPO investors. (Admittedly, this simplifies the overall algorithm too much as it ignores the impact of market pricing and market price movement and probably a whole host of other variables. Nevertheless, it emphasises ownership - with my shares I own a chunk of the business.)
FWIW: part of my holding in AXS was a rights issue so my money did go directly into plants etc.
Hi @pelim, Yes I quite understand your problem, investments that don’t pay a dividend are a problem for anyone investing for income for all of the reasons that you have outlined. That’s why people investing for income naturally gravitate towards dividend paying investments where you don’t need to sell to extract the income (however small).
Not sure about your 20 year requirement though, are you really going to hold the same investment for 20 years ?. I buy and hold but I’m pretty sure that there will be very few that I’d expect to be around for that long. And if they cut their dividend or share price dropped significantly (presenting a threat to the capital) then personally I would sell and invest elsewhere.
Investment Trusts paying regular dividends are a popular choice for income seekers as I am sure that you are aware. But are you aware of the AIC (Association of Investment Companies) ?. They specialise in Investment Trusts and provide a lot of useful tools for finding and comparing them.
A recent addition to the AICs toolset is an Income Finder tool that allows people with an IT based portfolio to plan out their dividend payments so that they are evenly spread over the year. There is a whole thread over on the Lemon Fool about this tool, see link below:-
Hope you find this useful.
Interesting Sunday Morning read this … thanks
Yes. I am quite happy the RDSB, ULVR, HSBA and a few others will be here for a while yet. They have seen me through the first 12 years of retirement. I monitor them from time to time. Of course, since this period took me through the 2008 crash it has not always been plain sailing. I retain a small interest in a few more speculative developing companies like AXS and SXX but keep my involvement to small amounts of cash. Hard to say whether these will be around in 20 years. My guess is that they will both be provided they are not taken over.
I shall look at AICs and Lemon Fool and learn.
Hi @pelim, Well the problem with all if the investments that you have listed is they are all what I refer to as “single stocks” and as such are often have a very volatile share price and in some cases might deliver an unpleasant drop in your income were the dividend to be cut. Investment trusts (ITs) try to avoid these problems by investing in a range of stocks, bonds, debt or other things (depends on the individual IT) hence removing the risk of non performance due to a problem with an individual share (or other investment) and a lower chance of a dividend cut.
ITs are actively managed and normally have some “theme” which in some way determines the constituents. As a result ITs incur ongoing charges and other costs which are built into the price, but should not be ignored when selecting an IT - anything more than a 1.5% OCF is expensive.
ITs also usually have a Net Asset Value (that being the price per share of all of the trusts assets). Trusts where the price is higher than the NAV are said to be trading at a premium, those where the price is below the NAV are said to be trading at a discount. Ideally buying a trust that is trading at a discount is to be preferred. Certainly buying a trust that trades at a large premium is normally reckoned not to be a good idea. That said investors are still buying LTI which is trading at a 100% premium ATM (!) so people will do it if they think that they will get a sufficient return. Has to be a high risk thing to do though…
PS And yes as Armageddon says Unit Trusts (UTs) and Open Ended Funds (OEICs) are something else again. Dont confuse them with Investment Trusts as they are quite different. ETFs are quite similar to Investment Trusts but usually track an Index and have lower charges - but really deserve a longer description than I have time for right ATM.
Best words I’ve seen here for a long time. I think the risk when trading at a discount, is a lot lower than single stocks , by at least 70% reduced. (Not that you cant lose)
Don’t go to unit trusts as some do, when told IT
LLOY flying again, downwards, was nudgin near 1 % down a few minutes ago.
Having said that I have just within the last 30 minutes, opened 3 long trades.
Only need a little recovery for those to work.
See what happens
Think it’s going lower
back to 50
even under 50
LLOY is better than other banks but growing business from here will be tough for LLOY - specially since they have already employed cost cutting measures.
Where will LLOY find new clients ?
How willl existing customers start spend or borrow more ?
Mean while Monzo N26 etc etc are growing too fast.
Good luck to holders
I think that the fear of a hard Brexit is factored in for now. It would certainly fall harder if a hard Brexit were to happen but we are some way off at present.
Anyone’s guess though!
So that was a good punt on LLOY today Soi? Well called!
Brexit is over its done all the harm it could - more years will get wasted by Brexit. Brexit will happen it’s American agenda to hurt EU
I dread American ambitions with Sino Persian conflict. We are lucky Chinese aren’t temperamental like Russia.
Pretty confident Trump will get re-elected and pretty confident the current banking system won’t have much to reap.
I think we will have to wait a bit to assess The Groper’s chances of re-election. According to the Washington Post, he just sacked his own polling organisations for predicting that Biden would win by a good margin.
Well that would be great so I hope you’re right
Thanks, yes all 3 longs were limit closed at profit ( small %, I try not to be greedy )
Struggled elsewhere though.
A lot of volatility in markets.
Hi Soi, I admire your investing skill. I am sure you make a lot more money than me. I am content to buy and hold and only rarely sell. Its pretty easy to sit back and watch the divis roll in and reinvest without too much effort. I just took a look and YTD my portfolio is up 9%. That’s fine for me, though probably not for you. I am fortunate that my income (excluding dividends) is more than enough to keep me in wine and roses.
Wishing you continued success.
Frog in a tree
I don’t think it is. The actual economic harm of the UK leaving the EU to the UK and EU economies is yet to work through for an actual hard Brexit. I don’t believe its priced in because no one can really predict it accurately.
If it happens expect all the banks to be depressed somewhat for a while as it all plays out and GDP is lowered in the UK and the EU. It will simply create an environment in which banks don’t do well traditionally, including prolonged periods of low interest rates.
Meanwhile expect more rulings like the recent one that has ruled charging extra for un-arranged overdrafts will be illegal from April 2020. Similar legislation has already limited charges on credit cards, PPI has been shown up as a scam, even though a lot of it was actually legitimate business, similarly with ‘with profits endowments’.
In a slower or regressing economy there will be less business loans to be made with lower interest rates to be earned. The same goes for the mortgage book.
The best ways to make money for LLOY is charging for current accounts - but they can’t risk introducing that on their own. If they get together with the other banks to do it altogether the regulators will crush them for acting as a cartel.
If you’re investing in LLOY and expecting it to make profits like it did in previous years and generations, you have to realise its market is just about to be curtailed from 500m to 65m people as a starting point, and that its remaining market is hostile and has been since the financial crisis.
One thing is certain across banking. Expect a million or more job losses in the near future.
Very well explained
Thank You .
9% YTD is actually a good achievement, better than many fund managers I would say.
I am more of a trader than an investor, take higher risk and put in a lot of hours, try not to be greedy on trades but do aim to be well rewarded overall.