It's really short sighted to invest based in dividends alone, you should invest based on what the company is going to make in profit and what they plan to do with it.
No, the total profits the bank makes, is 16% of the share holders equity ie the net amount of assets owned by share holders.
For example, you start a pizza shop
You put in $50K of your own money, and borrow $50k from the bank, so you have $100k in total.
You rent a shop front, hired a manager, you spend the $100k to buy a pizza oven, fit out the shop nicely, signage etc.
After 12 months the shop made $55k gross profit, you pay $5k to the bank in interest, you $15k in tax, leaving you with $35k profit.
Your $35k after tax profit is a 70% return based on your equity of $50k you put in at the start.
So you as a share holder are earning a 70% return on equity, which is really good.
Cba is currently earning 16% on the funds its share holders have put in.
I don't think they do, the four major banks take on board all of Australia's borrowings and lending's, this is the reason we didn't fall over in the GFC.By all mean make profit. Just don't screw over (mainly poor) people and pensioners out of their interest and calling it fair.
I don't think they do, the four major banks take on board all of Australia's borrowings and lending's, this is the reason we didn't fall over in the GFC.
Imagine if we had hundreds of small banks, that were borrowing money from overseas, the GFC happened then the overseas banks call in their debts.
Most of our small banks would have defaulted, because they were on lending the money, at $100 to say $10 deposits.
Then all those smaller banks, would have gone bely up, losing the deposits and the shareholders money.
The four pillars banking system underpins our financial stability, we are a small population, with a ridiculous perception of our importance.
We want the stability of a banking system, that gives us a warm feeling about the security of our money, but we want to screw them down to risking that security.weird IMO
I am not recommending investing in pizza shops, just trying to help rumple understand return on equity.So you gonna get a Domino franchise or keep owning bank stocks?
How much profit do you think a pizza shop make per sale?
Say it's a Pizza Hut pizza at $7 selling price. I'm pretty sure you're not making 200%+ on the main ingredient. And pretty sure the guys that sell you the flour, the cheese aren't selling them to you at less than inflation rate.
The 16 percent means everything to the people buying now, it's the rate at which their assets are earning and compounding.Yes fine, but when the shares were originally allocated they would have cost say $1 each. The share price is now say $80. So that 16% is only relevant to the people who bought the shares at issue time correct ? And they are probably all dead or have sold their shares.
So your 16% means nothing to people who buy shares now . Am I right ?
didn't you just admit before one guys expense is another guys revenue.
e.g., that "loss" the silly negative gearing guy experiences is adding revenue to the income statement of the banks, banks staff and depositors, where it will be taxed
I am not recommending investing in pizza shops, just trying to help rumple understand return on equity.
I get what you are saying, but in the end it's the return to the shareholder not the company that matters to [most] investors.
Most people who want an alternative to a bank deposit would still go for dividend yield I would think.
Thanks for your patience.
.
Which account is the best to own? which is worth more?
That's been kinda my point all along, e.g. Owning equity in a business has more risk than having a secured deposit in a bank.In the company situation however, there is no guarantee that retained earnings will be returned to shareholders, it could be used to offset losses or pay off creditors so it's a bit difficult to make a comparison with a bank account in that case.
That's been kinda my point all along, e.g. Owning equity in a business has more risk than having a secured deposit in a bank.
I have never denied that, I've just questioned your risk/reward equation which tends too much towards shareholders (talking about banks here), who I think we both agree take on very little risk in this country but get much higher rewards than those who supply their trading stock in the first place.
You are wasting your time, trying to explain something that people don't want to hear.16% for the best in class bank business isn't to high, Consider that the company that makes the flu vaccines is earning about 40%, Woolworths earns like 23%, capilano honey is 28%,
Even in bad years the miners earn about 10-15%, and in the best years can earn 60%+
16% for the best in class bank business isn't to high, Consider that the company that makes the flu vaccines is earning about 40%, Woolworths earns like 23%, capilano honey is 28%,
Even in bad years the miners earn about 10-15%, and in the best years can earn 60%+
You are wasting your time, trying to explain something that people don't want to hear.
Pauline, pre election was all for the banking Royal Commission, post election she was given a briefing by the treasury and now not a bleat.
The four pillar banking system, is all that is stopping a wobbly third world economy, from falling over. IMO
That would depend on what they are investing in, if they are just putting their money in the bank, not much at the moment.What's the average ROC for a typical bank depositor?
That would depend on what they are investing in, if they are just putting their money in the bank, not much at the moment.
However if inflation returns to normal, and bank deposits are returning 7 - 10 %, there will be a massive rush for bank account deposits.
Then shares will tank, and everyone will be bitching about the loss of capital in shares, house prices will drop because a 5% return with a $hit tenant won't cut it.
Then I hope you will be going on about the poor property investor, or the bank shareholder that has his share price halved and dividend less than bank interest. We've seen it all before.
Then I hope you will be going on about the poor property investor, or the bank shareholder that has his share price halved and dividend less than bank interest. We've seen it all before.
So then the investor sells their shares and puts the money in the bank. Bank has more liquidity, lends out more money and the cycle goes on.
The bottom line is that more than 50% of the economy is consumer spending. If consumers spend, businesses make money and vice versa. Every buck that non discretionary spending such as increases power prices or increased health insurance takes is less that will be spent at the grocery aisle or at Harvey Norman or at the street cafes. Then business starts whinging about no customers.
So if business screws the consumers, the consumers will screw back but they won't make a fuss about it, they just won't spend any money.
I presume you have noticed that full time jobs are disappearing and wages are going backwards ? Business is laughing at the moment but eventually consumer demand will dry up and the customers won't be spending as much.
Then we have a recession and everyone loses.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?