They can yield an income too: shares
Most investors tend to focus on capital gains (or, more recently, losses), ignoring the income-producing potential of shares. But, Roger Montgomery warns, picking stocks for an income-producing strategy, can be costly. Read article.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Eamon
:
Companies gives out dividend for varies reasons;
– it attract certain clientale (fund managers that requires dividend
as prerequisite).
– fundamental signal; the company can grow organically whilst managing cashflow appropiately.
– doesn’t think they can redeploy such retain earning anymore so begins paying.
– have paid sufficient tax that they company has alot of stored franking credits to distribute, hence can only attach this benefit on the distributed dividends.
Eamon :) ( I love recieving dividends, keep them coming)
Roger Montgomery
:
Me too. Thanks Eamon.
Rici Rici
:
I understand the theoretical logic of your post.
But in the ‘real world’ i like my dividends. Mainly for two reasons:
(a)Accounting gimmickry can be used to distort ‘profits’, its much harder to ‘cover up’ the payment of a cash outlay in the form of dividends.
(b) i dont have a lot of trust in company executives. There seems to be too much focus on short vs long term performance. Two basic examples, look at the share buy backs that were happening at much higher prices, yet when the GFC came along, some of those same companies did capital raisings at much lower prices.
Secondly look at the history of ‘value’ added from mergers and acquisitions. There seems a lot of value add for the market participants in the deal making (investment banks, CEO’s with short term remuneration policies etc) but not nearly as much value add for the long term shareholders.
In the words of John Rockefeller:
Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.
Roger Montgomery
:
Hi Rici Rici,
Here are some further thoughts to;
a) Think about Telstra borrowing to pay dividends, Qantas and MIG. Dividends are not absent in the presence of accounting adjustments.
b) I cannot disagree. There are a lot of toads in the corporate back yard as a result of corporate kisses falling flat. So I can understand you wanting the money. But left with a great manager who has shareholders interests at heart, nothing is better than leaving the money in an enterprise that generates very high rates of return.
c) So Rockefeller would have completely disliked Berkshire Hathaway!
Great points though because it does get me thinking.