Seems the premium to NTA has come down for AFI significantly...still 5% but compared to the insanity of last year...
Wow ,,, according to that logic, Woodside , with a 10 per cent yield, should be trading around 100 bucks. CSL, with 1% yield, should be trading around 100 bucks.I've been watching AFI and ARG as the premium to NTA has come out.
One thing I was looking at last night was the dividend yield, AFI for example is spruiking their 0.24c FY22 fully franked dividend on the front page. ARG has a similar number.
The only thing is that at the current price of $7.04, 24 cents would be giving you a measly 3.4% yield grossed up to 4.8%.
With 10Y Aus Gov bonds trading at 4% and high yield savings accounts offering 4-5%, one has to wonder how much lower index-ish large cap ASX portfolios need to go to offer a reasonable risk premium.
Wow ,,, according to that logic, Woodside , with a 10 per cent yield, should be trading around 100 bucks. CSL, with 1% yield, should be trading around 100 bucks.
It may depend on your personal tax rate and components in the gross amount (franking credit offset, LIC Capital gain, blah, blah, blah.)
Broad numbers for a taxpayer on 19% and no other income.
$30,000 in interest payment. Tax liability $2,114. Net income $27,886.
$21,000 ff dividend ($9,000 franking credit.)
Taxable income $30,000. Tax refund $9,000. Net income $30,000
As usual, it all depends.
Yes ebbs and flows, oh for the 10% for 10 years term deposits. ?Did I miss something when I grossed up the yield from 3.4% to 4.8%?
4.8% is better than 3.4%, but is it enough compensation relative to the riskless 4-5% in a savings account or 4% from a 10Y government bond?
It wasn't so long ago that the dividend yield on large cap ASX portfolios was always much more than the interest on a bank account or from a risk free bond.
Are govt. bonds & savings/term deposits risk free? Yes, your cash is there but if you're getting say 4% interest & inflation is 6% then you're losing 2% per year. If in term deposits there could be tax (depending on income, thus a further loss) as shown by @Belli.Did I miss something when I grossed up the yield from 3.4% to 4.8%?
4.8% is better than 3.4%, but is it enough compensation relative to the riskless 4-5% in a savings account or 4% from a 10Y government bond?
It wasn't so long ago that the dividend yield on large cap ASX portfolios was always much more than the interest on a bank account or from a risk free bond.
Are govt. bonds & savings/term deposits risk free? Yes, your cash is there but if you're getting say 4% interest & inflation is 6% then you're losing 2% per year. If in term deposits there could be tax (depending on income, thus a further loss) as shown by @Belli.
Current div. from index-like AFI might not be great but that is short term thinking
When you are living on your investments, that is your income plus increasing your capital to account for inflation, you have to be conservative because there is no pay cheque replacing your loses.FWIW, the 10 year price return on AFI has been a total of 28% or about 2.6% CAGR.
ARG is similar at 3%.
Essentially all the performance of total return has been in dividends. To me it seems obvious that dividend yield is a pretty good proxy for risk premium (or lack thereof) in AFI.
When you are living on your investments, that is your income plus increasing your capital to account for inflation, you have to be conservative because there is no pay cheque replacing your loses.
For example with covid the share prices crashed, the dividends stopped, interest rates were zero, but you still had to withdraw money to live.
So during covid AFI's dividend stayed constant, which was fortunate because a lot of the staple dividends like banks dropped considerably.
Living on your savings isn't easy, especially when the media uses you as the go to headline. ?
I guess it depends what you are after from your portfolio, the balance you want and the risk you are prepared to take on.Given a prudent investor would normally demand a premium to take on equity risk vs the other risk free options available today returning about the same amount, is the current price (and therefore yield) providing enough of a risk premium? If not, how much further should it fall until it does?
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