An extra $25,000 a year

10 Comments

1. 

   Brian
   July 11, 2011 at 2:29 pm:

   Hi Roger,
   I notice that there is quite a variation in the amounts of money you allocate to each company within the sample portfolio provided in the article. Elsewhere I believe that you’ve stated that you allocate more to assets which you believe are trading at the greatest discounts to IV. Is this what you’ve done here, or were there other considerations? (Obviously, dividend yield gets a mention in the article.)
   Regards,
   Brian.

   • 

     Roger Montgomery
     July 13, 2011 at 12:21 am:

     That was secondary input. Quality came first…

2. 

   Brad
   July 10, 2011 at 11:46 am:

   Re ORL, I concur Andrew, share price is too high for us to commit new funds

   Hold for existing positions

   There are a few broker reports out now so more attention on the stock than say 12 months ago

   Sally McD is speaking at a mothers breakfast at my daughters school in a month- might dress up as a waiter and sneak in !

3. 

   Nic Arena
   July 8, 2011 at 11:52 am:

   A few people discussed Ideas International (IDE) the other day. They have just received a Merit Award for their new CloudSizer tool at the recent NSW State iAwards presentation. The iAwards are designed to honour both companies and individuals at the cutting edge of technology innovation in Australia. Thought people would like to know. Although the shares are very illiquid and we have have seen an “interesting” couple of months lately, Ideas share price has risen to 95 cents. Don’t know if I can post a link here but the article can be viewed at prwire. If link worked it is here: http://www.prwire.com.au/pr/23859/cloudsizer-public-cloud-sizing-and-comparison-tool-wins-aiia-merit-iaward

   • 

     Nic Arena
     July 25, 2011 at 8:54 pm:

     Don’t know if anyone is still looking at this post but Ideas International is now at $1.10. Interesting seeing the market has either been flat or going down. It would be interesting to see if anyone else has an eye on thsi company and what they think.

4. 

   Andrew
   July 8, 2011 at 11:13 am:

   Final one Roger, this post came out at the same time that i have been thinking about the income side and how to factor that into my style.

   I recorded a price for Oroton a couple of days ago $7.72.

   This resulted in the company being at 2% discount to IV in 2010, 5.5% premium to IV in 2011.

   I have the dividend yield for these two years at 6.09% and 6.22% respectivley.

   I would require at least a 30% discount to IV before purchasing. So lets say a market price fo $5.00 comes up.

   The dividend yields for this period goes up to 9.4% and 9.6% respectivley.

   If the market price hits my IV and i sell i get a 30% return, whilst waiting for that to happen i get a dividend yield of over 9%. I think that is a win-win scenario.

   I used Oroton as an example only, i would not say i would even buy at the moment if the price did hit 5% as i want to see what there results are like and any opinions on the future outlook as i have the IV declining over the next two years.

   My gut tells me this is wrong but my calculations are telling me otherwise and as it has no emotion i am going towards that.

5. 

   Andrew
   July 8, 2011 at 10:31 am:

   I liked the article Roger and think you put a lot of common sense points across. I got extremley angry when Fincorps etc all folded a few years ago leaving retirees, mums and dads etc all out of pocket and in some cases loss of their retirement and life savings.

   I think all the talk about dividends, blue chips etc fall into a similar field. There is nothing untoward about it but when given to mums and dads who are not necessarily sophistacted investors without the proper tools, disclaimers and lessons they can be absolutley devastating.

   Dividend yield is a helpful filter but should come down the list of importance. Quality should always be number 1. Especially as you mention a quality company will usually have increasing profits and very good free cashflow, this means dividends will increase. So why wouldn’t you want to make sure you get this, by buying this company below IV you are giving yourself every chance of decent capital growth.

   My thoughts are you could use the yield as a secondary margin of safety filter. Lets say you want a margin of safety of at least 30% and a dividend yield of 5% than you will wait to buy until the company is both ata >30% discount to IV and dividend yield of >5%. The idea of forecast IV’s you teach also allow us to see what it will be like in future years as well.

   • 

     Andrew
     July 8, 2011 at 10:44 am:

     Sorry Roger, just wanted to add one more thing. The bigger the discount to IV the bigger the dividend yield. Also, you get the benefits of hopefulyl a solid capital growth so if you need some more you can just sell some shares at a profit.

     The idea of investing for income is joined at the hip to value investing as value increases the income.

     Was it Graham who said a quote along the lines of all investing is value investing.

     • 

       Roger Montgomery
       July 8, 2011 at 4:25 pm:

       It was Munger I believe.

   • 

     Roger Montgomery
     July 8, 2011 at 4:25 pm:

     Thanks Andrew.