# Best shares for income/dividends



## MrBurns (11 April 2012)

I'm about to put some money into shares that give the best dividends, TLS is one but what are your thoughts on any others.

Yes I risk losing capital if the market tanks but there seems to be a lot of pressure on the RBA to lower interest rates even further, wouldn't that keep the market up ?

If the world goes into another GFC .....well I guess whatever shares I choose will also tank.

I've no idea how to risk manage shares not even sure if it's possible.

Keeping cash in the bank is no longer a real option, returns just too low.


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## prawn_86 (11 April 2012)

DO some basic research on how to read a balance sheet. TLS is kind of unique because of their monopolistic position but as i understand it they are still borrowing in order to pay their dividend.

I would suggest CAB or read the Hybrid Securities thread for other high yeild options. I currently hold MXUPA and am getting 11% pa based on my purchase price


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## MrBurns (11 April 2012)

prawn_86 said:


> DO some basic research on how to read a balance sheet. TLS is kind of unique because of their monopolistic position but as i understand it they are still borrowing in order to pay their dividend.
> I would suggest CAB or read the Hybrid Securities thread for other high yeild options. I currently hold MXUPA and am getting 11% pa based on my purchase price




Thanks prawn, the other thing about TLS is ,I believe, that they only guarantee their dividend until some time next year, when presumably the dividend (at the present level)and borrowing will stop and the share price will drop also I presume.

Re balance sheet, what am I looking for ? sustained profits ? trends ?


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## Klogg (11 April 2012)

Is there a reason why you want shares for pure dividend?

Don't get me wrong, it's not totally a bad idea, but wouldn't you rather find a stable company paying a decent dividend (6-7%) rather than go into some managed fund that most likely won't be able to continue the sorts of dividends you're after.

I did a simple search on ComSec about 5-6months ago with the same goal in mind and I found (along with many others):

BRG ~6% (Partially Franked)
*DWS ~9% (Fully Franked)*
TGA ~6% (Fully Franked)

These companies had (and still have) little debt, weren't borrowing for dividend payments and funnily enough, are now paying a bigger dividend than they were back then.
(And you'll notice I highlighted DWS - the dividend on that just got bigger)
From my initial research CAB seem OK, but I haven't looked into them enough.

As to what to look for in terms of dividends I would normally check:

- Cash flow to ensure any borrowing isn't happening to pay dividends (they should however, borrow if the reason is valid)
- The company is sufficiently covering interest (no hard and fast rule here, but that's because I look for low Debt to Equity too), so that dividends can continue to be paid
- A trend showing an increase in profits/dividends is nice, but not always 100% accurate. Although a company shouldn't be a continual decline in profits either, that would worry me.
- Comparison to other similar companies in that sector. For example, checking BHP dividend payments vs RIO
- Return on Equity: although this doesn't explicitly set the dividend amount, this will determine the amount of money the company can make from shareholder equity and therefore what is available for dividend payments.
- Payment ratio: You'd expect this to be relatively high, given you're looking for dividend payments. (Although if you find a company paying high dividends and a low payment ratio, without any debt to service that, I would love to see it!)

After saying all this though, I would suggest some basic accounting research in how to read a balance sheet, income statement and cash flows statement. It's not too hard, but you should get yourself familiar with atleast that.


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## MrBurns (11 April 2012)

Klogg said:


> Is there a reason why you want shares for pure dividend?




Well not just pure dividend I want t balance the risk with the dividend, but if it's around 6% it's not much better then a TD, franking doesn't worry me as I don't seem to pay tax for various reasons.

As for all the other research I'd rather find an adviser who has already done it, but who can you trust to be independent and competent ?

Great information many thanks for posting


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## Klogg (11 April 2012)

MrBurns said:


> Franking doesn't worry me as I don't seem to pay tax for various reasons.




I'd imagine you get the franking credits refunded to you from the ATO if that's the case.

And if so, a 6% FF dividend would become a 7.8% dividend.




MrBurns said:


> As for all the other research I'd rather find an adviser who has already done it, but who can you trust to be independent and competent ?




Sorry, can't help you here. I find that analysts/advisors act in their own self-interests far too often for me to trust their input on _my investments_. And I think you'll find a lot of the experienced people on these forums (i.e. not me, lol) would tell you the same thing on this subject, although I don't speak for them.
Although if you want to verify your findings, analysts predictions/recommendations can be _a part_ of that verification process.

And I'm glad to help


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## MrBurns (11 April 2012)

Klogg said:


> Sorry, can't help you here. I find that analysts/advisors act in their own self-interests far too often for me to trust their input on
> 
> And I'm glad to help




I've always left everything to acountants and only concentrated on making the money not managing it, so I'm clueless in that area.

Thanks again.


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## Chasero (11 April 2012)

Well last september when the world was tanking, SWM had a dividend yield of ~17% fully franked at around $2.50.

It's around $4 now so..


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## Klogg (11 April 2012)

Chasero said:


> Well last september when the world was tanking, SWM had a dividend yield of ~17% fully franked at around $2.50.
> 
> It's around $4 now so..




Yeah, I noticed that late last year but opted against investing there - put my funds elsewhere. Shame, because SWM has returned slightly more to date.


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## McLovin (11 April 2012)

prawn_86 said:


> DO some basic research on how to read a balance sheet. TLS is kind of unique because of their monopolistic position but as i* understand it they are still borrowing in order to pay their dividend.*




That's incorrect.


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## Julia (11 April 2012)

MrBurns said:


> Well not just pure dividend I want t balance the risk with the dividend, but if it's around 6% it's not much better then a TD, franking doesn't worry me as I don't seem to pay tax for various reasons.



Someone else has already explained the benefits of franking.



MrBurns said:


> I've always left everything to acountants and only concentrated on making the money not managing it, so I'm clueless in that area.



Perhaps I'm just very conservative, but until I knew a bit more about investment, what to look for in companies, etc, I'd be leaving my money in the bank at call at 6%.
Sounds like a sure route to disaster to me to be whacking funds into something  just because it has a high dividend.  Often it's high just because the SP has had a significant fall.

Burnsie, you say "so what if my capital falls", imo only of course, but as far as I know you're retired and so probably don't have as much capacity to build funds as you did when you were working, so wouldn't capital preservation be a priority?


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## MrBurns (11 April 2012)

Julia said:


> , I'd be leaving my money in the bank at call at 6%.




If you can get 6% ..
unlikely at present.



> Burnsie, you say "so what if my capital falls", imo only of course, but as far as I know you're retired and so probably don't have as much capacity to build funds as you did when you were working, so wouldn't capital preservation be a priority?




I don't think I said that Julia - I am sort of retired, sold a business a few years back, capital preservation is my highest priority but I realise I'll have to take on some risk to get a reasonable return.


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## Chasero (11 April 2012)

MrBurns said:


> If you can get 6% ..
> unlikely at present.
> 
> 
> ...




Try Ubank. I use it and I think it's not bad.

It's something like 6.2% after you setup a linked account.

or 6.01% if you dont link your account with a setup every month.

I would also not recommend getting in shares unless you know for a fact you can earn >6% every yr..


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## MrBurns (11 April 2012)

Chasero said:


> Try Ubank. I use it and I think it's not bad.
> 
> It's something like 6.2% after you setup a linked account.
> 
> ...




Cant get that rate for a SMSF I dont think.


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## Julia (11 April 2012)

MrBurns said:


> Cant get that rate for a SMSF I dont think.



 Yes you can.  
Here are some of the options:
http://www.infochoice.com.au/banking/savings-account/list.aspx
True that not all are available to SMSFs.
Have a talk with Rabodirect.  They're very customer friendly.


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## Muschu (11 April 2012)

As a retiree : DWS, mentioned above, has served me well.  So too has TEL.  

Not all have been that good and the future is barely predictable.  Many variables are in play - personal risk profile being one.  

Certainly not a "one size fits all" scenario.

Rick


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## MrBurns (11 April 2012)

Julia said:


> Have a talk with Rabodirect.  They're very customer friendly.




Thanks I will.


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## MrBurns (11 April 2012)

Muschu said:


> Certainly not a "one size fits all" scenario.
> 
> Rick




I'd feel a bit more confident if every share I've taken up lately hadn't tanked.

Stick with the majors I guess, the ones I bought in the past have been mainly speculative.


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## Julia (11 April 2012)

MrBurns said:


> I'd feel a bit more confident if every share I've taken up lately hadn't tanked.
> 
> Stick with the majors I guess, the ones I bought in the past have been mainly speculative.




There's no guarantee of profits if you stick with the majors.
I've been staying in cash since the GFC but have left a small position in RIO just to prove to myself that buy and hold doesn't work in anything other than a bull market.
It's still down on what I paid for it, probably now about two years ago, and has such a miserable yield, I'd have been far better off with that money at call.

You might like to consider broadening your knowledge base in order to build some confidence about how to invest.  The ASX monthly news bulletin might be a starting point.


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## MrBurns (11 April 2012)

Julia said:


> You might like to consider broadening your knowledge base in order to build some confidence about how to invest.  The ASX monthly news bulletin might be a starting point.




Ta I'll take a look


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## doctorj (11 April 2012)

In case it helps anyone, here's a dump showing yields for all Australian listed stocks
	

		
			
		

		
	

View attachment ASX Yield.xls

	

		
			
		

		
	
.


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## So_Cynical (11 April 2012)

doctorj said:


> In case it helps anyone, here's a dump showing yields for all Australian listed stocks
> 
> 
> 
> ...




I hold 4 Stocks in the top 40 and 8 in the top 100...#9 GLB - globe, is a very low liquidity micro 
cap (16.5 mill) with no debt, 9 mill in cash and annual revenues of around 90 mil.


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## Muschu (12 April 2012)

MrBurns said:


> I'd feel a bit more confident if every share I've taken up lately hadn't tanked.
> 
> Stick with the majors I guess, the ones I bought in the past have been mainly speculative.




So, if I may ask, how do decide what to buy MrB?

Regards

Rick


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## MrBurns (12 April 2012)

So_Cynical said:


> I hold 4 Stocks in the top 40 and 8 in the top 100...#9 GLB - globe, is a very low liquidity micro
> cap (16.5 mill) with no debt, 9 mill in cash and annual revenues of around 90 mil.




Just things I read and try to get hints from ...but havent bought anything for a while.


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## YELNATS (12 April 2012)

Klogg said:


> I'd imagine you get the franking credits refunded to you from the ATO if that's the case.
> 
> And if so, a 6% FF dividend would become a 7.8% dividend.



Shouldn't that be a 8.57% dividend?
ie. for a $100 investment, FF dividend is $6.
$6/(1-0.30) = $8.57. 

Please correct me if I'm wrong.

Cheers


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## Klogg (12 April 2012)

YELNATS said:


> Shouldn't that be a 8.57% dividend?
> ie. for a $100 investment, FF dividend is $6.
> $6/(1-0.30) = $8.57.
> 
> ...




Yes, I believe so.
Wow, massive math failure on my behalf, lol.


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