CBA - Commonwealth Bank of Australia

[breaker]

Like a lot of shares yesterday, CBA dropped like a stone into irrationly oversold territory. The downward spike was a buy signal for the bold and cashed up, unfortunately I am neither.

I follow cba (in a similar manner to "pairs trading") using it as a bench mark for the banking sector in general and a close comparison to wbc due to their weighting in mortgages.
I have formed the opinion that CBA is worth a buy and hold when it dips under $50.00, with a view to taking profit between $52.00 - $54.00. This gives a 4% to 8% return for a short term hold. Buying in yesterdays spike down would set up an even better return.

Additionaly if you hold for the required period of time and take a dividend with franking credits and still manage to sell with a capital gain, your profit is even higher.

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My only problem with buying cba is the price range is higher than I like, as I can buy 2 wbc shares for less outlay and make the same sort of return on a swing trade without going overweight in my portfolio.

Nulla, can I ask how many shares ? can you please explain the attraction I dont feel the 4-8%profit is much
Can you explain if I were to buy $100k before the 15th and if any better than BHP ect
WBC half the price but half the divie

 

[Julia]

Nulla, can I ask how many shares ? can you please explain the attraction I dont feel the 4-8%profit is much
Can you explain if I were to buy $100k before the 15th and if any better than BHP ect
WBC half the price but half the divie

Breaker, how do you come by the conclusion that WBC is half the dividend of CBA (if that's in fact what you're saying)?

Nulla will correct me if I'm misinterpreting what he said, but the 4 - 8% profit is the capital gain over a few days according to the scenario he put up. Not to do with the dividend yield.

 

[ajjack]

Julia

The most recent dividends and SP as announced is CBA 3.20 and 48.23.
WBC 1.50 and 20.14.
Therefore breaker is correct in saying 'WBC half the price but half the divie'.

 

[breaker]

Breaker, how do you come by the conclusion that WBC is half the dividend of CBA (if that's in fact what you're saying)?

Nulla will correct me if I'm misinterpreting what he said, but the 4 - 8% profit is the capital gain over a few days according to the scenario he put up. Not to do with the dividend yield.

Julia,CBA is 1.88 WBC is 76 cent divie..... CBA 48.23 WBC 20.14 share price
Am thinking off buying in these hard times .but I dont understand their value
Sorry didnt read previous post and my divie must be half yearly

 

[nulla nulla]

Nulla, can I ask how many shares ? can you please explain the attraction I dont feel the 4-8%profit is much
Can you explain if I were to buy $100k before the 15th and if any better than BHP ect
WBC half the price but half the divie

1000 - 2000 depending on available cash to back up the buy if I have to hold it. Selling at $52.00 after purchasing at $50.00, is a 4% gain. Selling at $54.00 after purchasing at $50.00 gives an 8% gain. 4-8% for a few days to weeks holding is worth my while.

Breaker, how do you come by the conclusion that WBC is half the dividend of CBA (if that's in fact what you're saying)?

Nulla will correct me if I'm misinterpreting what he said, but the 4 - 8% profit is the capital gain over a few days according to the scenario he put up. Not to do with the dividend yield.

WBC is just a attractive as it represents the same potential % returns. Holding, after a share like wbc & cba go ex-div, and acheiving a capital gain on the trade is bonus material as the div comes with a franking credit for those that have held for the requisite 45+ days.

After last nights djia action the banks will probably be cheaper again today.

 

[breaker]

1000 - 2000 depending on available cash to back up the buy if I have to hold it. Selling at $52.00 after purchasing at $50.00, is a 4% gain. Selling at $54.00 after purchasing at $50.00 gives an 8% gain. 4-8% for a few days to weeks holding is worth my while.



WBC is just a attractive as it represents the same potential % returns.

Thanks Nulla , so in a SMSF the divies would be tax free and I would reinvest them ?
The share usually drops ex-divie

 

[nulla nulla]

Julia

The most recent dividends and SP as announced is CBA 3.20 and 48.23.
WBC 1.50 and 20.14.
Therefore breaker is correct in saying 'WBC half the price but half the divie'.

CBA with a div of $3.20 on the share price of $48.23 has a yield of 6.63%. WBC with a div of $1.50 on a share price of $20.14 has a yield of 7.44%. At those yields wbc is the better option. Also you can buy 2394 shares in wbc for the same investment in cba.

Fundamentals are still relevent, however todays sentiment may shift the ratios arround a bit.

 

[nulla nulla]

Thanks Nulla , so in a SMSF the divies would be tax free and I would reinvest them ?
The share usually drops ex-divie

Divies are still taxable in smsf 15%, the franking credits (assuming the qualifying period has been met) are a handy offset against the income tax component (as distinct from capital gains). If fully franked they represent a 30% credit.

All capital gains and divs are reinvested in a smsf (unless of course you are in pension mode).

 

[McCoy Pauley]

A record profit announced today and the market response could only be described as "luke warm" at best.

All the banks were up today but cba only half as much % wise as the rest. What do the analysts reasonably expect in this economic environment?

Ralph Norris' last full year result as CEO - the new bloke is bit of an unknown quantity. Plus CBA admitted that it was losing market share to the other banks (particularly NAB, though not in so many words) in its full year results presentation.

 

[breaker]

Divies are still taxable in smsf 15%, the franking credits (assuming the qualifying period has been met) are a handy offset against the income tax component (as distinct from capital gains). If fully franked they represent a 30% credit.

All capital gains and divs are reinvested in a smsf (unless of course you are in pension mode).

Thanks Nulla, I know gains and divs are reinvested but not necessarily in the same share if I reinvested in the same share would this be compounding ?

 

[Julia]

Julia

The most recent dividends and SP as announced is CBA 3.20 and 48.23.
WBC 1.50 and 20.14.
Therefore breaker is correct in saying 'WBC half the price but half the divie'.

Julia,CBA is 1.88 WBC is 76 cent divie..... CBA 48.23 WBC 20.14 share price
Am thinking off buying in these hard times .but I dont understand their value
Sorry didnt read previous post and my divie must be half yearly

Surely you're not going to compare the yield on CBA and WBC on a dollar basis when they have completely different SP's????

On a % basis, there's about one percentage point between them in WBC's favour.

To consider the dividend on a dollar/cent basis is a bit like saying you get more for your money if you buy penny shares. In the end, all that matters is the percentage return on your capital.

 

[breaker]

Surely you're not going to compare the yield on CBA and WBC on a dollar basis when they have completely different SP's????

On a % basis, there's about one percentage point between them in WBC's favour.

To consider the dividend on a dollar/cent basis is a bit like saying you get more for your money if you buy penny shares. In the end, all that matters is the percentage return on your capital.

No but for 50k there isn't much difference

 

[Julia]

Julia,CBA is 1.88 WBC is 76 cent divie..... CBA 48.23 WBC 20.14 share price
Am thinking off buying in these hard times .but I dont understand their value
Sorry didnt read previous post and my divie must be half yearly

This is what I was referring to. The dividend is always quoted on an annual basis, not half yearly. For the sake of clarity, quoting in % p.a. is the most clear way to make a comparison.

Divies are still taxable in smsf 15%, the franking credits (assuming the qualifying period has been met) are a handy offset against the income tax component (as distinct from capital gains). If fully franked they represent a 30% credit.

All capital gains and divs are reinvested in a smsf (unless of course you are in pension mode).

Are you saying that you personally have a SMSF and have chosen to reinvest all capital gains and dividends?
Presumably not that it's automatic for any capital gains and divs to be reinvested?

Breaker's following post seems a bit ambivalent about this.

Not everyone is going to want to reinvest either c. gains or dividends in the same company. I never do either.

Thanks Nulla, I know gains and divs are reinvested but not necessarily in the same share if I reinvested in the same share would this be compounding ?

 

[nulla nulla]

Surely you're not going to compare the yield on CBA and WBC on a dollar basis when they have completely different SP's????

On a % basis, there's about one percentage point between them in WBC's favour.

To consider the dividend on a dollar/cent basis is a bit like saying you get more for your money if you buy penny shares. In the end, all that matters is the percentage return on your capital.

And of course you generally have more security investing in cba or wbc than the penny dreadfuls. Minimising risk and protecting your capital.

 

[nulla nulla]

Are you saying that you personally have a SMSF and have chosen to reinvest all capital gains and dividends?
Presumably not that it's automatic for any capital gains and divs to be reinvested?

Breaker's following post seems a bit ambivalent about this.

Not everyone is going to want to reinvest either c. gains or dividends in the same company. I never do either.

I have a SMSF and I re-invest the capital gains and divends. Not necesarily in the same shares as I go where I see the oportunities.
At one stage I was buying and selling IOF and churning the total funds back into subsequent buys of IOF. That was the clearest indication of the strength of swing trading and compounding returns versus buying and holding for divs and a hopefull capital gain.

 

[breaker]

I have a SMSF and I re-invest the capital gains and divends. Not necesarily in the same shares as I go where I see the oportunities.
At one stage I was buying and selling IOF and churning the total funds back into subsequent buys of IOF. That was the clearest indication of the strength of swing trading and compounding returns versus buying and holding for divs and a hopefull capital gain.

I guess what I'm getting at is I've lost money lately I'm wondering if it is'nt just as easy to buy the blue chips and go away, than trading every day It would take a lot off BHP say to make a liveable return

 

[nulla nulla]

I guess what I'm getting at is I've lost money lately I'm wondering if it is'nt just as easy to buy the blue chips and go away, than trading every day It would take a lot off BHP say to make a liveable return

Hard call to answer that one. Trading isn't everyones cup of tea. You don't have to trade every day, every instrument etc. You should choose what you are comfortable with, develope your system and fine tune it as you go.
Sometimes you take a step backward before you go forward. But this is getting a bit off topic. Good luck.

 

[Starcraftmazter]

So 10% of the 13% of the profit growth came from arreas reserves (or whatever it's called), with credit growth slowing to almost nothing, am I the only one who expects CBA's next reported profit growth to be extremely low?

 

[Muschu]

Would appreciate views on CBA being pushed to an artificial high before going XD...

Comments welcome


Rick

 

[ajjack]

@Muschu

The price and volumes of most stocks is increased just prior
to going ex div. But it has been especially noticeable with
the banks recently. Not all banks however, just the big4.

I dont think there's any conspiracy out there, its just that
most punters are wise to CBA, and they want a part
of the action.