Tuesday, 06 August 2013 - 20:00
Dividends can be defined as the distribution of a portion of the earnings generated by a company. Private investors who need to receive a stream of income can invest in high dividend paying shares and investors looking for value biased shares will be on the lookout for companies with high dividend yields (dividend divided by price). For these, and other, reasons dividends are widely scrutinised by the public and both deserve further investigation.
Starting with the former; the widely used logic that higher dividend paying companies are the best choice when investing for income can, to a certain extent, be countered by the theory of dividend irrelevance. This theory states that if a dividend can be “home-made” (shares sold to create a dividend like cash stream) the presence of a dividend does not necessarily mean the investor is better off receiving a dividend.
Consider the example of Mr A, who needs an income of R 5 000 and can either hold 1 000 shares in Company X or Company Y. Both of the shares trade at R 50 and Company X declares a R 5 dividend, while Company Y doesn’t declare a dividend. When Company X goes ex-dividend (after the payment of the dividend) the value of the share should decrease by the amount of the dividend (R 5), as the cash is being paid to the investor from the company’s balance sheet.
If Mr A invests in Company X, his shares would now be worth R 45 000 and he would have received a R 5 000 dividend. If he invests in Company Y he can sell 100 shares and receive the cash flow of R 5 000. Because this transaction has no effect on the share price, his shareholding would be worth R 45 000 (900 shares @ R 50). The chart below reflects the position that Mr A would be in under both scenarios.
This is a simple illustration that Mr A should be in the same position if he receives a dividend or sells his shares (before the impact of any taxes). While the payment (or non payment) of dividends can be an important signal from management, a high dividend yield (or even the presence thereof) shouldn’t be the only determining factor when shares are bought.
Looking briefly at the latter use of dividends mentioned above, a high dividend yield is a sign that the company is generating good earnings (and importantly cash flow) relative to the current share price, which is a big positive. For value investors, the presence of a high dividend yield is often an important metric, as the investor gets rewarded with a good yield, rather than being solely reliant on selling the share at a higher price. Essentially there is a margin of safety. While a high historic yield is sought after – investors need to also ensure that the dividend is sustainable – i.e. that they will receive a similar (or better) dividend in the future.
At Seed we understand that a high dividend yield serves as a good indicator that the company deserves a closer look from a fundamental perspective. We therefore use dividend yield (both historic and forward) as a filter when looking at the investment universe. Those shares that offer investors a good yield are put on a short list, and can ultimately end up in our private client portfolios.
021 914 4966
Tue, 06 Aug 2013
Shareholders were advised that Stefstocks' integrated annual report, incorporating the group audited financial statements for the year ended 28 February 2013 has been posted and emailed to shareholders today, 6 August 2013.
Notice of annual general meeting
Notice was given. . .
Nedbank Group Ltd. ("Nedbank "), the majority-owned South African banking subsidiary of Old Mutual, released its interim results for the six months ended 30 June 2013 today, 6 August 2013.
*Headline earnings increased 13,3% to R3 914 million
*Diluted headline earnings per. . .
World Markets (Spot Prices)
|JSE Top 40||17:00||37129.66||-205.16||-0.55%|
|JSE Indust 25||17:00||48210.62||17.69||0.04%|
|Rand / Dollar||19:59||9.9197||0.0844||0.86%|
|Rand / Pound||19:55||15.2156||0.1416||0.94%|
|Rand / Euro||19:55||13.1990||0.1543||1.18%|
|Rand / NZD||19:59||7.8485||0.1261||1.63%|
|Rand / AUD||19:55||8.9230||0.1336||1.52%|
|Yen / Dollar||19:59||97.6510||-0.6110||-0.62%|
|Euro / Dollar||19:59||0.7513||-0.0028||-0.37%|
|Dollar / Euro||19:59||1.3308||0.0048||0.36%|
|Pound / Dollar||19:55||0.6503||-0.0007||-0.11%|
Click here for the Sharenet Spot Price page
The JSE Today
* Includes all listed instruments on the JSE
|Index Name||RP||Move||% Move|
|Financial & Ind. 30||50,950.75||-28.66||-0.06%|
|Oil & Gas ||35,302.18||-135.46||-0.38%|
|Oil & Gas Producers ||18,981.33||-72.83||-0.38%|
|Basic Materials ||24,734.63||-426.31||-1.69%|
|Forestry & Paper ||24,343.26||113.07||0.47%|
|Industrial Metals ||23,523.49||37.69||0.16%|
|General Industrials ||123.19||-.33||-0.27%|
|Consumer Goods ||52,283.55||-55.08||-0.11%|
|Automobiles & Parts ||8,484.93||174.37||2.10%|
|Health Care ||66,789.84||-390.23||-0.58%|
|Index Name||RP||Move||% Move|
|Food Producers ||71,433.28||-1477.39||-2.03%|
|Personal Goods ||1,000.16||21.37||2.18%|
|Consumer Services ||9,230.79||19.13||0.21%|
|General Retailers ||57,971.47||-1253.63||-2.12%|
|Travel & Leisure ||5,606.04||-26.02||-0.46%|
|Support Services ||2,672.67||10.81||0.41%|
|Non-life Insurance ||48,351.82||370.07||0.77%|
|Life Insurance ||29,173.35||-209.25||-0.71%|
|General Financial ||2,825.91||-11.22||-0.40%|
|SHARIAH TOP40 ||3,453.64||-40||-1.14%|
|FTSE/JSE SHARIAH ALL||3,579.54||-39||-1.09%|
|FTSE JSE Fledgling ||5,558.78||-2||-0.03%|
|FTSE/JSE Alt X ||987.58||-8||-0.81%|
|SA LISTED PROPERTY ||502.47||0.15%|
|CAPPED PROPERTY ||420.14||0.02%|
|FTSE/JSE RAFI 40||8,147.53||-73||-0.89%|
|Capped Top 40||19,634.03||-100||-0.51%|
|Capped All Share||21,053.02||-114||-0.54%|
|JSE TABACO ||6,806.84||-38||-0.55%|
Click here for the Sharenet Index Summary page
Latest Consensus Changes**
|VOD||VODACOM GROUP LIMITED||HOLD||02/08/2013|
|PIK||PICK N PAY STORES LIMITED||SELL||02/08/2013|
|SGL||SIBANYE GOLD LIMITED||BUY||02/08/2013|
|TKG||TELKOM SA LIMITED||SELL||02/08/2013||
|Expected||Company Name||Fin. Date|
|08/08/2013||AQUARIUS||June 2013 (Final)|
|08/08/2013||AQUARIUSCVT||June 2013 (Final)|
|08/08/2013||EXXARO||June 2013 (Interim)|
|08/08/2013||MONDILTD||June 2013 (Interim)|
|08/08/2013||MONDILTDP||June 2013 (Interim)|
|ZURICH SA||01/08/2013||23/08/2013||02/09/2013||R 1.0000|
|SOV||Sovereign Food Investments Ltd.||07/08/2013||Confirmed|
|AND||Andulela Investment Holdings Ltd.||07/08/2013||Confirmed|
|ANDP||Andulela Investment Holdings Ltd.||07/08/2013||Confirmed|
Stock Exchange News Service
Click here for more SENS news