# Retirees Seeking Dividend Growth



## Muschu (26 August 2017)

Hi 

I'm pretty much retired and have a SMSF.   Dividends are important to us [as is SP growth if we can get it... ]

We have some of the traditional stocks [banks, WES, a couple of LICs etc].

However I am also interested in companies which hopefully are "solid" [not out-there speculative stocks] but which  have been increasing their dividends... Some that we hold that seem to fit into this category are:
CCP
DTL
MOC
S32
VLW

Anyone care to add to this list?  Or is there some link that will lead me to such information? 

Thanks in advance for any contributions.


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## Sir Burr (26 August 2017)

Hi Muschu,

I'm into long term franked dividends. Have a Comsec account...
Quotes and research > Tools > Stock Screener and choose dividends with high franking and ones with 10 year results.

Use these in a watchlist for Amibroker with a long term system.


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## Muschu (26 August 2017)

Brilliant   Sir - Thank you.    I also use Commsec and will follow this up.....

And if anyone wants to offer an opinion on specific stocks then that too would be welcome.


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## Sir Burr (26 August 2017)

Not really an opinion but how about some AFI, MLT, BKI, ARG?


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## Muschu (26 August 2017)

Yes I have ARG, MLT and WAM.  I had AFI but concentrated more on ARG.  BKI is a fresh thought thanks. 
Also holding WES and IFL...


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## So_Cynical (27 August 2017)

Semi retiring soon, im looking at adding TLS or APO or SLK or CCL or QUB

I need FF dividends, TLS closer to the bottom than the top, multi billion dollar mobile network and will be a cash cow for decades to come, APO solid business that looks cheap, outdoor ads will always be around and a simple tool for advertisers.

SLK i think should be looked at as half an infrastructure stock as many state govts want and need private operators to run ferry services, recurring govt revenues and little competition, CCL everyone needs to drink and still the largest marketing operator in the country, debt has been massively reduced over the last 5 years.

QUB infrastructure of sorts, that new inland port at Moorebank will be a major import facility going forward and they have a virtual monopoly there, growth industry.


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## Muschu (27 August 2017)

Thanks SC.... 
Not sure just how high a FF dividend I should seek as perhaps that comes with other risks.
I've decreased my TLS by two-thirds and remain concerned about the SP when they go XD.
From your list I will look more deeply into APO and SLK.
Also wondering just how many companies I want to hold in retirement..... Any thoughts there?


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## Sir Burr (27 August 2017)

Muschu said:


> Also wondering just how many companies I want to hold in retirement..... Any thoughts there?




Backtesting ideas in Amibroker and for me 15-20 is a good number but someone who promotes buy and hold for dividend income is Peter Thornhill.

Also about LICs, I understand in times like 2008 some continued paying high dividends from their cash reserves so I'm keen on some LICs too but mostly direct shares.


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## Muschu (27 August 2017)

I admit to sleeping better with LICs but these are probably about a third of our portfolio... Which has about 20 stocks. 
Has Peter Thornhill much of a following?


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## So_Cynical (27 August 2017)

I hold LIC's (AFI, FGX & ALF) and ETF's (YMAX & MVW) a valuable place or both types of stocks in any long term yield portfolio, i will end up with about 25 - 30 holdings, its not a big deal to have a few too many, on the ETF front DIV & ETF are high franking and starting to look cheap, not there yet though,.

Im expecting a Sept/Oct pull back.


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## Value Hunter (27 August 2017)

If you are bullish on the property market Tamawood (TWD) is worth a look. It has a strong balance sheet, high return on equity, high inside ownership and a long and solid track record. It pays a solid fully franked dividend every year. Worth a closer look. Similar story with the property stocks Cedarwoods properties (CWP) and Sunland Group (SDG). Sunland Group is trading at a discount to NTA. My personal view is that the property boom in Australia will probably continue for years to come. 

Of course these are all cyclical stocks and if the property market has a downturn their earnings and dividends will fall. However they are all strong enough to withstand a down turn (and will likely all pay some sort of dividend albeit reduced in a property downturn).


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## Muschu (27 August 2017)

Yes SC there's always a correction coming ..... Volatile days.  

Anyone "excited" about any of these?
CWN
SRG
JHC reporting Monday
NCK


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## Muschu (27 August 2017)

Property scares me VH.. Maybe because I'm in Perth  
Feel the same about retail and travel...............  But FLT and QAN proved me very wrong.
Still holding RFG and not sure why........


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## Value Hunter (27 August 2017)

Muschu funny that you mentioned Perth. I actually think Perth economy and property will start to recover soon (in the next 6 months). So property plays in Perth might be worth looking at. The property developer Finbar (FRI) most operates in Perth. It is worth a closer look. FRI is selling at a discount to NTA which has been depressed by write-downs due to the weak property so its been a double whammy on the downside and will be the reverse on the upside (NTA will rise and the discount to NTA will disappear).


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## Muschu (28 August 2017)

Don't know that I agree  VH... We bought a house in Perth near the coast in 2007 and sold in 2014 at a slight loss.
Bought another when we sold the one above, in a similar area, in 2014 and current value is about what we paid.
Depends upon the suburb; and the market may be near the bottom.  But unemployment is high; builders are struggling for work; the State is broke [we get 33c per dollar of our GST back]; and any interest rate rise will be very damaging...


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## kefa (28 August 2017)

Muschu said:


> I admit to sleeping better with LICs but these are probably about a third of our portfolio... Which has about 20 stocks.
> Has Peter Thornhill much of a following?



Yes but not on a stock forum. 
https://www.propertychat.com.au/community/threads/peter-thornhill.9877/


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## Belli (29 August 2017)

Not heard of Peter Thornhill before but then I don't follow much in the way of commentary on the market.  It's mostly white noise to me as there is sooo much of it around, I tend to get confused so I generally avoid reading it.

As for dividend stuff, I'm basically in the same situation as the OP.

My holdings are LIC's only both in the SMSF and outside of it.  These are:

AFI
ARG
BKI
DJW
MIR
MLT
PIC
PMC
WHF

That's it.  Aside from my account-based pension, for my personal holdings, I add to them each year when I can, especially if there is a share purchase plan, and, as a result, over the last few financial years (2012 to 2017) I noticed my income has been increasing by around $1,500 each year.  Keeps ahead of my household costs (rates, etc).  I don't feel I've ever gone short of funds as I do adhere to a budget, which seems, oddly to me, an aspect many of my peers appear to ignore.


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## Muschu (29 August 2017)

Thanks Belli.... Some might think them boring but my ARG, MLT and WAM sure aren't proving as volatile as most... And the dividends are fine and fully franked.
Far easier than watching my bank shares and TLS getting smashed, although I have off-loaded some CBA and all TLS.
Have you noticed whether some of your LICs have grown more than others since 2012?  Just curious.
I'm into my 70s and seeking maximum stability.


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## Belli (29 August 2017)

Muschu said:


> Thanks Belli.... Some might think them boring but my ARG, MLT and WAM sure aren't proving as volatile as most... And the dividends are fine and fully franked.
> Far easier than watching my bank shares and TLS getting smashed, although I have off-loaded some CBA and all TLS.
> *Have you noticed whether some of your LICs have grown more than others since 2012?*  Just curious.
> I'm into my 70s and seeking maximum stability.




Ah this is the point at which I may be called a fool but no worries, I've been called that before both to my face and in front of others.

The answer is I don't know really.  As far as I am aware there is no legislation which requires me to monitor the prices of the LIC's I hold outside of the SMSF, so I don't.  See no need to add stress to my life.  Sure, I mentally do some numbers when I go to invest funds but otherwise I don't bother.  As for the SMSF, as far as I understand, it only has to be priced once a year and I consider that's the accountant's job.  Again, I mentally do numbers when I reckon I have sufficient cash in the SMSF but apart from that I'd rather enjoy my retirement than sweat over money.  It's why I consider LIC's work for me and I'm only concerned - in a financial sense - about me.


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## Value Collector (29 August 2017)

Muschu said:


> Anyone care to add to this list?  Or is there some link that will lead me to such information?
> 
> Thanks in advance for any contributions.




Take a look at FMG.

They have a pretty good dividend payout ratio.

currently paying a fully franked 8.3% dividend, with a good chance of capital gain of up to 50% over the next 3 years or so.

I think they would make a good addition, to diversified portfolio.


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## Muschu (29 August 2017)

At my age and with time I'd rather give to other things than the market...... I am swinging to the LIC option.
However Dr Google informs me that there are huge numbers of these.
I can't see a specific recent thread on this so may start one with Joe's OK...


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## Belli (29 August 2017)

Muschu,

Here is a link for your delectation.  Click on the header to got to LIC's and other bon mots.  Gives at a glance the MER and the performance fee if there is one.

http://www.asx.com.au/products/etf/managed-funds-etp-product-list.htm


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## Muschu (29 August 2017)

That's a good deal to digest Belli.... Maybe I'll go fishing instead 

Being greedy I guess the following are sifters:
Low management fees
No performance fee
Growth
Dividends

As I mentioned I have ARG, MLT and WAM

Best of the rest?
BKI
MIR - higher MER?
PIC - high dividend but MER 1.0
WHF
PMC - as PIC
MFF --- good performance, low dividend.

Further comment would be great.


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## Value Collector (29 August 2017)

Also if you have a pool of cash that you hold, consider storing it in "rate setter loans", they pay high interest, and both principle and interest is paid back to you monthly over the life of the loan.


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## Belli (29 August 2017)

Cannot comment on much.  When I do decide to invest funds, it's on the basis I'll never see it again.  Usually, I look for a yield or around 4% - 4.5%, NTA close to or below price at the time depending on what the particular LIC does for a living.

Don't object to the managers making money but prefer it was only through them holding shares in the LIC and director's fees not via performance fees which seem mostly to be paid to management companies in which they also have an interest.  I'm not hard and fast on that however.  It's all whether I'm comfortable.

I'm 65 and have been doing this stuff since my early thirties and running the SMSF for 20 years.  Not trying to shoot the lights out and keep it as simple as I can is my approach.  Any gloss or excitement, if it exists, dissipated years ago.  As long as the funds I invest are doing the job I want them to do, I'm not fussed.

And thank you to the tax office for the refund which will go into some more shares.  Never waste a windfall. Did quite well without the dosh during the past year so may as well invest it.  Kind of silly (dumb?) getting a refund when I also receive an account-based pension but that's the idiotic tax laws our Parliament has passed.


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## Muschu (29 August 2017)

Thanks VH and Belli.... Think I may progress in this direction myself but seek opinions on which LICs.... I am also quite a bit older than you Belli and still doing some consultancy work, but easing off


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## kefa (30 August 2017)

Muschu said:


> Think I may progress in this direction myself but seek opinions on which LICs....



The mods may not like this but the best LICs thread is on propertychat.
https://www.propertychat.com.au/community/threads/listed-investment-companies-lics.267/


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## Muschu (30 August 2017)

That was a great lead thanks kefa although I may pursue the same discussion here.


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## Wyatt (30 August 2017)

Value Collector said:


> Also if you have a pool of cash that you hold, consider storing it in "rate setter loans", they pay high interest, and both principle and interest is paid back to you monthly over the life of the loan.




Hi VC, I looked around at a few youtube clips on Rate Setter and one fellow suggested to break the loans down into much smaller bite sized pieces to diversify and reduce risk. Did you consider or do this and what are your views on the loan guarantee facility, also I see there are some borrower details in recent loans created, such as use of funds and income, how did you go about deciding who got what, if you don't mind me asking?
Cheers Wyatt


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## luutzu (31 August 2017)

Muschu said:


> At my age and with time I'd rather give to other things than the market...... I am swinging to the LIC option.
> However Dr Google informs me that there are huge numbers of these.
> I can't see a specific recent thread on this so may start one with Joe's OK...





At the risk of stating the obvious, to be comfortable with some certainty of a (continued) dividend payout, shouldn't we have to look very closely into the underlying business/es?

I mean if a company's financial position and performance is poor, or become poor in the future, its dividends will be reduced or cut.

With  LICs or REITs... wouldn't we have to look at each and every one of the underlying assets/company that they hold to have a sense of certainty of keeping that principle and a reasonable interest/dividend?


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## Value Collector (31 August 2017)

Wyatt said:


> Hi VC, I looked around at a few youtube clips on Rate Setter and one fellow suggested to break the loans down into much smaller bite sized pieces to diversify and reduce risk. Did you consider or do this and what are your views on the loan guarantee facility, also I see there are some borrower details in recent loans created, such as use of funds and income, how did you go about deciding who got what, if you don't mind me asking?
> Cheers Wyatt



Rate setter is a bit different to other peer to peer lenders, you don't get to know any details of the loan you are funding ( although you can see the historical loan book), and as you mention the provisional fund is there to protect you ( so far it seems pretty good protection)

You can break up you loans into as many small loans as you like, I generally put my money into 5 year loans, and have it set up so principle and interest payments reinvest monthly into 3 year loans, so the principle is constantly drip feeding into new loans, spreading risk.

The principle and interest of the 3 year loans then flows to my spending money account via automatic payment.


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## qldfrog (31 August 2017)

Value Collector said:


> Rate setter is a bit different to other peer to peer lenders, you don't get to know any details of the loan you are funding ( although you can see the historical loan book), and as you mention the provisional fund is there to protect you ( so far it seems pretty good protection)
> 
> You can break up you loans into as many small loans as you like, I generally put my money into 5 year loans, and have it set up so principle and interest payments reinvest monthly into 3 year loans, so the principle is constantly drip feeding into new loans, spreading risk.
> 
> The principle and interest of the 3 year loans then flows to my spending money account via automatic payment.



I have had a look at a few of these peer to peer lender and even started one application form [as a lender] but was missing a sophisticated investor document and end up half way and forgot about it, so far VC you have had a positive experience?


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## Value Collector (31 August 2017)

qldfrog said:


> so far VC you have had a positive experience?




You don't need to be a sophisticated investor for rate setter.

Yeah so far so good, as I said I use it to manage my cash holding.

I typically use 50% of my dividends to live off, but I generally have about 2 years of wages in cash to act as a buffer should dividends be reduced in the short term or a have a big expense come up.

So at the moment if I get say a $20K dividends check I break it up as follows.

$10,000 gets reinvested in more shares
$ 5,000 gets put into an interest account where I store spending money
$ 5,000 gets put into rate setter loans, where it then drip feeds back to spending money account.

-------------------

As I said above, I put the rate setter funds into 5 year loans, the 5 year loan principle and interest is reinvested into 3 year loans, and the 3 year loans principle and interest drip feeds back to my spending account monthly.

So if I put $5,000K into rate setter, it will earn a bit over 8% and the principle and interest feeds back to me slowly over about 8 years.


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## Value Collector (31 August 2017)

luutzu said:


> At the risk of stating the obvious, to be comfortable with some certainty of a (continued) dividend payout, shouldn't we have to look very closely into the underlying business/es?
> 
> I mean if a company's financial position and performance is poor, or become poor in the future, its dividends will be reduced or cut.




Absolutely, I would recommend those who are disinterested In following companies to choose an index like the asx200.

Perhaps even 70% asx200 index, and 30% international index.


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## Muschu (1 September 2017)

Apologies for the lack of input as I have been reading up on LICs...


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## Muschu (1 September 2017)

VH: The only resource stock I hold directly is S32.  I've been spending some time looking at LICs but without coming to a conclusion yet.


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## Value Collector (1 September 2017)

Muschu said:


> VH: The only resource stock I hold directly is S32.  I've been spending some time looking at LICs but without coming to a conclusion yet.




The only LIC I own is Berkshire Hathaway, it's the only one I would recommend, other wise just by indexes.


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## austini (1 September 2017)

Value Collector said:


> The only LIC I own is Berkshire Hathaway, it's the only one I would recommend, other wise just by indexes.



Thought I'd pop over from Property chat.  Forgot I was a member here.  Muschu will know who I am.

In relation to BRK vs ASX LICs you may find this of interest:
https://cuffelinks.com.au/lics-vs-berkshire-imputation/


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## Smurf1976 (1 September 2017)

Value Collector said:


> other wise just by indexes.



Pick any random non-investment forum and have a look at their "off topic" section for anything about investing. You'll find one consistent recommendation - index funds.

It seems that everyone from mechanics to hairdressers is, to the extent they're investing in anything at all, piling into this one. Take a look at your superannuation and where it's really invested - you'll find a pretty big chunk is simply tracking various stock market indexes.

Sounds awfully like a bubble to me particularly in the context of overseas markets (USA especially). Easy money - just buy the index and never sell. What could go wrong?

Oh wait, central banks are in the process of taking away the punch bowl.....


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## austini (1 September 2017)

Smurf1976 said:


> Pick any random non-investment forum and have a look at their "off topic" section for anything about investing. You'll find one consistent recommendation - index funds.
> 
> It seems that everyone from mechanics to hairdressers is, to the extent they're investing in anything at all, piling into this one. Take a look at your superannuation and where it's really invested - you'll find a pretty big chunk is simply tracking various stock market indexes.
> 
> ...



Yep as discussed on the blog linked below.  Everything happens in cycles.  Index funds / ETFs can potentially make for a useful core but I haven't given up on actives.  A contrarian approach has typically worked well for me over a few decades of investing now as a retiree:
https://stevegreeny.com/2017/08/17/...gers-to-outperform-common-catalysts-for-lics/


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## Muschu (1 September 2017)

Smurf1976 said:


> Pick any random non-investment forum and have a look at their "off topic" section for anything about investing. You'll find one consistent recommendation - index funds.
> 
> It seems that everyone from mechanics to hairdressers is, to the extent they're investing in anything at all, piling into this one. Take a look at your superannuation and where it's really invested - you'll find a pretty big chunk is simply tracking various stock market indexes.
> 
> ...




I'm learning, for me [not necessarily others] that LICs [and perhaps VAS] may have a bigger argument than I had realised.

For example a significant part of our SMSF was in CBA, also held by ARG and AFI for example. When the bank SP got smashed ARG and AFI barely blinked..... 

So my current considerations are around holding some individual stocks but allocating a greater proportion to LICs - and they are not all clones of one another. 

Thanks austini and VH.


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## luutzu (1 September 2017)

Smurf1976 said:


> Pick any random non-investment forum and have a look at their "off topic" section for anything about investing. You'll find one consistent recommendation - index funds.
> 
> It seems that everyone from mechanics to hairdressers is, to the extent they're investing in anything at all, piling into this one. Take a look at your superannuation and where it's really invested - you'll find a pretty big chunk is simply tracking various stock market indexes.
> 
> ...




An index fund, I guess, is "easy" money in that an investor just buy and hang on for the ride. But that's the aim though - to get one's capital access to the financial market and "grow with (the economy)" as Buffett say.

I think it's a very sensible advise for those that have no interest, or not enough knowledge/experience yet, to study individual companies to invest in. 

That's, of course, not to say that the Index/market won't fall. Just the passive investor is expose to the market and so will have to go along. 

To pick a managed fund of some sort... I know I would feel comfortable unless I know what's behind their individual assets/company holdings. And if I can or have the time to study each of those, I might as well pick my own individual stock and save on the fees.

Outside of an index, maybe do what VC recommends and buy Berkshire Hathaway. It might actually be worth a lot more soon after the great man kick the bucket and the empire breaks up into various principalities. Not that I wish him ill of course... ey, he does talk about being run over by the bus alright.


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## austini (1 September 2017)

Muschu said:


> I'm learning, for me [not necessarily others] that LICs [and perhaps VAS] may have a bigger argument than I had realised.
> 
> For example a significant part of our SMSF was in CBA, also held by ARG and AFI for example. When the bank SP got smashed ARG and AFI barely blinked.....
> 
> ...



I'm not an index fanatic like the Boglehead fraternity but index product can be useful at times.  As you said CBA and TLS are major holdings in the older LICs and the index.  In reality these older LICs are really somewhat of an index proxy nowadays.  So CBA and TLS get hammered resulting in a decent correction in the index.  But alas the damn LICs didn't barely change or rediculously they actually went up in price.  This is where owning an index ETF such as VAS can be useful.  You are guaranteed that the likes of VAS will closely follow the index allowing you to take FULL advantage of a market correction.

A simple rule some use is: when the major older LICs are trading at a noticeable premium to NTA then buy the index ETF, otherwise buy the LICs.

As discussed elsewhere this is all discussed here in the attached basic LIC GUIDE I put together:


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## Muschu (1 September 2017)

luutzu said:


> ....
> 
> "... I think it's a very sensible advise for those that have no interest, or not enough knowledge/experience yet, to study individual companies to invest in......."




Rather a "knowing", generalist and paternalistic comment perhaps?  NO interest = Zero interest.

Advice or advise?   Could there not be more knowledgeable or experienced investors that choose an alternate path?


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## austini (1 September 2017)

Muschu said:


> Rather a "knowing", generalist and paternalistic comment perhaps?  NO interest = Zero interest.
> 
> Advice or advise?   Could there not be more knowledgeable or experienced investors that choose an alternate path?



I gave up analysing direct stocks years ago.  The portfolio once consisted of around 30 to 40 direct stocks with a additional core of LICs.  There are only a few direct stocks remaining, the rest is mostly LICs and a couple of ETFs.

I enjoy reading about investing but have better things to do in retirement than analysing companies especially when I can own index ETFs and LICs Managing a portfolio for a tiny fee of around 15 basis points.  And I like to keep it simple so that my wife who has little interest in such things can easily manage the portfolio if I'm no longer around. 

It's all about having a simple and close to set and forget generous dividend income oriented portfolio for us in retirement.


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## luutzu (1 September 2017)

Muschu said:


> Rather a "knowing", generalist and paternalistic comment perhaps?  NO interest = Zero interest.
> 
> Advice or advise?   Could there not be more knowledgeable or experienced investors that choose an alternate path?




I must have a talent for insulting people or something. 

Anyway, you asked for opinions, I gave it. Quoting and otherwise stealing liberally from smarter people's observation.

I'm sure there are alternative paths to what Buffett recommend. Just that if an investor don't know, or don't care to know, the individual stocks within that listed investment holdings... they better know the stock picker pretty well to entrust their money to them. Just common sense I thought. 

I mean, how else would anyone decide the worth of a fund? 

Anyway, I too have better things to do.


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## Value Collector (2 September 2017)

Smurf1976 said:


> Pick any random non-investment forum and have a look at their "off topic" section for anything about investing. You'll find one consistent recommendation - index funds.
> 
> It seems that everyone from mechanics to hairdressers is, to the extent they're investing in anything at all, piling into this one. Take a look at your superannuation and where it's really invested - you'll find a pretty big chunk is simply tracking various stock market indexes.
> 
> ...




When it comes to investing you only have three options.

1, spend the time to learn the trade, and then more time to apply the trade to put your money to work, in the hope all your effort results in you beating the market average return

2, pay someone else to do the above for you, in the hope they can beat the market average return consistently, by enough that their fees are covered while still deliverying you an above average return.

3, buy an index, and get the guaranteed market average return.

If some one isn't prepared to become an investor, in my opinion the index is the best option.

There are a few rules though.

1, dollar cost average your funds in over time, regardless of the ups and down eg. Don't put more in because it's going up and don't stop putting funds in because it's gone down.

2, don't trade or try and time the market, you aren't in that game, you are in the business of owning a broad cross section of the economy, your a business owner, not a trader.

Buffett resently won a 10 year bet, where he showed the average hedge fund didn't beat the market, the fees are just to big of a drain.


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## Value Collector (2 September 2017)

austini said:


> Thought I'd pop over from Property chat.  Forgot I was a member here.  Muschu will know who I am.
> 
> In relation to BRK vs ASX LICs you may find this of interest:
> https://cuffelinks.com.au/lics-vs-berkshire-imputation/




I actually think they cherry picked that data there, they picked a high point from which to measure berkshires performance,

In the 12 months prior to the date they chose Berkshire had doubled in value, and was due for a period of consolidation.


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## austini (2 September 2017)

Value Collector said:


> I actually think they cherry picked that data there, they picked a high point from which to measure berkshires performance,
> 
> In the 12 months prior to the date they chose Berkshire had doubled in value, and was due for a period of consolidation.



You may well be correct.  I'll check with Peter Thornhill again  but from memory I think he had Gluskie from WHF create the charts and that was the only accurate data they had on hand.

But still it makes for an interesting comparison given that most consider these old LICs boring and hardly likely to even come anywhere near the performance of one of the greatest companies in the world.

The thing with BRK that even Buffer I think has stated is that the larger the company gets the harder it is to outperform and the talent he is competing against is of a dramatically higher standard than earlier on.  So perhaps the last 20 years is more representative of what to expect from BRK going forward.

As a retiree I favour dividend paying assets especially in the tax free Super pension environment.  But BRK is an outstanding investment for someone who is wanting to delay tax until retirement.  Hence an internal compounding company like BRK is ideal for this.  No cash dividend equals no tax until one starts converting capital to income by selling shares in the company.

I only consider myself an amateur investor so bear that in mind with any of my comments.


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## Muschu (2 September 2017)

luutzu said:


> I must have a talent for insulting people or something.................................
> Anyway, I too have better things to do.




Or judging and assuming.


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## luutzu (2 September 2017)

Muschu said:


> Or judging and assuming.




Free advice [advise?]... when someone take their time to answer you, it's a bit rude to slap them mate. Even if they're someone who need a good slapping, you shouldn't do it because others who might want to help answer you wouldn't want to risk it.

Was that preachy? So in addition to blah blah, I'm also blah blah.

Good luck.


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## Muschu (2 September 2017)

luutzu said:


> Free advice [advise?]... when someone take their time to answer you, it's a bit rude to slap them mate. Even if they're someone who need a good slapping, you shouldn't do it because others who might want to help answer you wouldn't want to risk it.
> 
> Was that preachy? So in addition to blah blah, I'm also blah blah.
> 
> Good luck.




To clarify: I don't think you were "insulting".  
I do consider that LICs can suit people of interest, knowledge and experience - austini being one.


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## Value Collector (2 September 2017)

austini said:


> As a retiree I favour dividend paying assets especially in the tax free Super pension environment.  But BRK is an outstanding investment for someone who is wanting to delay tax until retirement.




Remember a stock doesn't have to be a dividend payer to be a good "Income" stock. look at Berkshire Hathaway, it hasn't paid a dividend in over 50 years, but has funded thousands of retirement accounts.

If you want a 6% dividend, just sell 6% of your shares each year, you want a 10% dividend, just sell 10% etc etc

If a company has good ways of investing retained earnings, and can turn $1 of retained earnings into $2 of capital gain, it's silly for it to pay out the $1 as a dividend, you are better off receiving no dividend and just selling some of your shares each year.

Take Berkshire as an example, for years its grown at a rate faster than 10%, so you could have sold 10% of your shares every year for 50 years, and still grown your wealth, living off capital doesn't mean you will run out of funds.


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## Value Collector (2 September 2017)

This will be of interest to those interested in the index vs hedge fund debate.

Its 12 mins long, but its very interesting, I recommend grabbing a coffee (or maybe a coke) and watching it.


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## Muschu (2 September 2017)

Thanks VH.  

I may be misinterpreting but I just had a look at GLL which has 75% of its funds in Berkshire.  It's certainly done well since 2012 when it was 55c.... But before that seems flat.  

Haven't watched your video yet but will after I go for a walk. 

Still trying to absorb all this info - which I do appreciate.


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## austini (2 September 2017)

Value Collector said:


> Remember a stock doesn't have to be a dividend payer to be a good "Income" stock. look at Berkshire Hathaway, it hasn't paid a dividend in over 50 years, but has funded thousands of retirement accounts.
> 
> If you want a 6% dividend, just sell 6% of your shares each year, you want a 10% dividend, just sell 10% etc etc
> 
> ...



Yes I'm fully aware of the live off capital vs dividend argument.  For over thirty years I've seen this debated so many times I generally avoid the topic nowadays.  But one particular piece of history has always stuck in my mind.  Unless you're prepared to load up on longer term bonds then given a Great Depression scenario where sharemarket capital value was down 90% it gets pretty scary if needing to convert capital to income.  Dividends on the other hand were down much less at 50% and from memory recovered noticeably quicker.

Whether it's Bogle, Bernstein or numerous others I think most tend to suggest that the safest path to drawing on income in retirement is from the natural yield of the portfolio.  Very few companies unfortunately allocate capital as well as Buffet.  Only problem is of course it requires a lot of capital to generate sufficient dividend income which can delay getting to retirement.  And the other issue is that it often requires a high allocation to equities which can be a huge challenge psychologically to many investors during market crashes.

But really it just depends on the nature of each individual and their level of wealth as to which approach is the best fit.  Fortunately we're in a position where even in a Great Depression scenario we would still live quite well.

This is probably why there never seems to be a winner in the never ending living off capital vs dividend debate.  It depends on so factors, financially and psychologically, for a given investor that there is no right or wrong answer.

Hopefully I'm not coming across as being argumentative.  I'm newer here and don't want to come across the wrong way.


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## Value Collector (2 September 2017)

austini said:


> Yes I'm fully aware of the live off capital vs dividend argument.  For over thirty years I've seen this debated so many times I generally avoid the topic nowadays.  But one particular piece of history has always stuck in my mind.  Unless you're prepared to load up on longer term bonds then given a Great Depression scenario where sharemarket capital value was down 90% it gets pretty scary if needing to convert capital to income.  Dividends on the other hand were down much less at 50% and from memory recovered noticeably quicker.
> 
> Whether it's Bogle, Bernstein or numerous others I think most tend to suggest that the safest path to drawing on income in retirement is from the natural yield of the portfolio.  Very few companies unfortunately allocate capital as well as Buffet.  Only problem is of course it requires a lot of capital to generate sufficient dividend income which can delay getting to retirement.  And the other issue is that it often requires a high allocation to equities which can be a huge challenge psychologically to many investors during market crashes.
> 
> ...




I don't think it has to be a choice of either, you can do both.

e.g. have a portfolio of some companies that pay out a high ratio of earnings as dividends, while also not avoiding some companies that pay a smaller pay out ratio, but where larger capital gains are expected.

You can shield your self from market volatility, but holding a years wages as cash, during a big down turn, this cash pool will still get topped up a bit by dividends, so you might not have to make any sales for 18months.

Also, Big down turns normally come after big up ticks, so big gains made on sales during the big up tick offset the poor returns on the sales made during the down turn

Not mention that in my portfolio the companies that I have bought because of their growth prospects have since become my biggest dividend earners, while also seeing significant capital gains.

two of them paying more than 25% dividend based on my entry price.


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## austini (2 September 2017)

Value Collector said:


> I don't think it has to be a choice of either, you can do both.
> 
> e.g. have a portfolio of some companies that pay out a high ratio of earnings as dividends, while also not avoiding some companies that pay a smaller pay out ratio, but where larger capital gains are expected.
> 
> ...



All valid comments thanks.

Nowadays as a retiree I only invest in LICs mostly and a couple of ETFs.  To lazy and have different priorities nowadays rather than spending my time analysing company reports etc.  But I do hold some growth oriented LICs focused outside the ASX top 20 / 50.  Dividend payers for higher yield now are fine but lower yielding dividend growers are what generally offer the most reward over the medium / long term. I aim to hold funds that provide both.

I'm quite conservative so hold a noticeably higher cash buffer than one year's living expenses.  I also allow for a worst case (Great Depression) dividend scenario where overall it could be cut by 50% and take time to recover.

As for boom times rather than sell I just tend to reduce / stop buying, accumulate cash then average in when the inevitable period of gloom eventuates.  Been through a few crashes over my lifetime, very much the contrarian.  What's that quote of Buffet: be fearful when others are greedy and greedy when others are fearful.


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## Sir Burr (2 September 2017)

Value Collector said:


> I don't think it has to be a choice of either, you can do both.




Yes. A bunch of franked dividends and a simple long term system.

Not difficult to track, number of trades are low.
Cut out middleman (LIC management).
Possibly better capital gains compared to LICs.
Protect capital in downturns.


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## Value Hunter (2 September 2017)

At the end of the day I tend not to worry about dividends per say. I just pick companies that I think are undervalued and meet my criteria. Some have high dividend payout ratios, while others have low dividend payout ratios (and low dividend yields). I think this is the approach people should take. 

If you do this in the Australian stock market almost by default you will end up with a reasonable dividend stream over time. The nature of our market and our tax system means that most decent sized companies that are profitable will pay a dividend anyway (even though in some cases they should not). The U.S. market is a different story. Lots of profitable, high growth companies there prefer share buybacks, reinvestment or acquisitions over paying dividends.


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## rb250660 (2 September 2017)

I have what might possibly be a silly question. How do you calculate dividend yield? I know the formula but I am asking specifically about the timing. Do you calculate it based on the sum of the dividends paid last calendar year, last financial year or immediately after a dividend is paid? I guess it could depend on the 'cycle' of payment. What I mean is that if a company pays using an interim/final dividend structure you would need to wait until the final dividend is paid to make the yield calculation. So making a 'bulk' calculation of multiple stocks at any particular point in time, say at the end of each month could be wrong. What are your thoughts?

Reason I ask: I'm researching a rules based trading model build using dividend yield. My initial thoughts are:

Sum of last calendar year's dividends / Current price = yield

Is this over-simplistic or flawed in any way?


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## Value Collector (3 September 2017)

rb250660 said:


> I have what might possibly be a silly question. How do you calculate dividend yield? I know the formula but I am asking specifically about the timing. Do you calculate it based on the sum of the dividends paid last calendar year, last financial year or immediately after a dividend is paid? I guess it could depend on the 'cycle' of payment. What I mean is that if a company pays using an interim/final dividend structure you would need to wait until the final dividend is paid to make the yield calculation. So making a 'bulk' calculation of multiple stocks at any particular point in time, say at the end of each month could be wrong. What are your thoughts?
> 
> Reason I ask: I'm researching a rules based trading model build using dividend yield. My initial thoughts are:
> 
> ...




Different people and different organisations calculate it differently. For example most news papers just use the last 12 months worth of dividends, where as CommSec  website consensus forcast of future dividend.

I guess it's a personal thing, and which data you input into the calculation should depend on what you are trying to find out, or understand.

Obviously future dividends are more important than historical ones, but it's also next to Impossible to know with certainty what the future dividends will be, so i normally do a few calculations eg my best estimate of future dividends, as well as a best and worst case.


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## luutzu (3 September 2017)

rb250660 said:


> I have what might possibly be a silly question. How do you calculate dividend yield? I know the formula but I am asking specifically about the timing. Do you calculate it based on the sum of the dividends paid last calendar year, last financial year or immediately after a dividend is paid? I guess it could depend on the 'cycle' of payment. What I mean is that if a company pays using an interim/final dividend structure you would need to wait until the final dividend is paid to make the yield calculation. So making a 'bulk' calculation of multiple stocks at any particular point in time, say at the end of each month could be wrong. What are your thoughts?
> 
> Reason I ask: I'm researching a rules based trading model build using dividend yield. My initial thoughts are:
> 
> ...




Maybe I'm just lazy or don't know what I'm doing but I tend to not focus much, if at all, on a company's dividend in deciding its "investability". 

I just look at its "earning power" and that's pretty much its "dividend" to me, the "owner".

Once that's worked out/estimated, dividend payout policy are interpreted in context of that earnings. I mean, if a company's earning is weak and looks to be weak for the coming years... it shouldn't pay dividends, or restart that DRP to hang on to the cash. 

For a weak company, or one not earning enough to pay debt and liability and reinvest... but it still pay a dividend. Brings into question management's priorities - concern for share price  [and their bonuses] or proper business management.

I know dividends got to be paid, certain funds and investors need to be attracted and all that. Just a focus on one figure for investment yield might lead the investor to being played.


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## Value Collector (4 September 2017)

luutzu said:


> or one not earning enough to pay debt and liability and reinvest... but it still pay a dividend. Brings into question management's priorities - concern for share price  [and their bonuses] or proper business management.
> 
> I know dividends got to be paid, certain funds and investors need to be attracted and all that. Just a focus on one figure for investment yield might lead the investor to being played.




Unless the higher dividend is being used to purposefully reduce a companies equity, by returning capital to share holders.

Disney is currently doing this via Share buyback, they are currently buyback ship loads shares back, so much so that the total buybacks and dividends is about much higher than earnings, Basically replacing balance sheet equity with long term debt, due to the debt being fairly cheap at the moment.


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## Muschu (5 September 2017)

kefa said:


> The mods may not like this but the best LICs thread is on propertychat.
> https://www.propertychat.com.au/community/threads/listed-investment-companies-lics.267/



This proved exceptionally valuable - thank you


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## pinkboy (5 September 2017)

Muschu said:


> This proved exceptionally valuable - thank you




Its been an epic thread, but well worth the read.  Some other good commentary on the ASX mostly in a few other threads for dividend accumulation

pinkboy


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## luutzu (5 September 2017)

Value Collector said:


> Unless the higher dividend is being used to purposefully reduce a companies equity, by returning capital to share holders.
> 
> Disney is currently doing this via Share buyback, they are currently buyback ship loads shares back, so much so that the total buybacks and dividends is about much higher than earnings, Basically replacing balance sheet equity with long term debt, due to the debt being fairly cheap at the moment.




True. Kept forgetting that a buy-back is a form of capital return.

btw, how would the share buyback transact in the financial statements? Can't be just the cash asset being reduced by the cost of shares bought back [excl. brokerage etc.], reduce the contributed equity...

It's good you know why Disney is buying back. Some buy back just doesn't make much sense... though I guess they tend to increase the share price, or at least keep it from falling further, so no one ever complaint about it.


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## Dona Ferentes (16 April 2020)

Coronavirus has turned things upside down in terms of dividend expectations.

UBS says so far, 38 stocks in the ASX 200 have suspended, deferred or cut dividends and a further 60 have seen dividend forecasts fall by more than 20 percent.


> Aurizon, Ausnet Metcash, Coles Group, APA Group and Woolworths as having the best prospects for investors focused on dividend payments.





> AGL Energy, Amcor, Brambles, Bunnings landlord BWP Trust, CSL, Inghams, Kogan, Magellan, ResMed Rural Funds, Wesfarmers, Telstra and Clover Corporation should provide reliable earnings streams.





> They highlight SkyCity, Sydney Airport, JB Hi-Fi, Scentre Group, Challenger and Vicinity Centres as having dividend payout expectations that are too high. Other companies likely to pay a smaller dividend in the year ahead, or no dividend, are Alumina, ANZ, NAB, Northern Star, Oz Minerals, QBE, Servcorp, Stockland, Western Areas and Westpac.


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