Does share price really matter to an investor who has investments and relies on regular dividends as an income source. I have checked my bank balance and note deposits last week by MCR and OZL. The price of their shares has plummeted as we all know yet the dividend appears to be the same in cents per share as it would have been had the share price not fallen. The percentage return is great, better than expected. So for someone not intending to sell their shares in the near future and still getting dividends the daily SP matters very little. So why sell? Seems like it is better to buy more.
Does share price really matter?
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Re: Does Share Price Really Matter.
This is a classic example of a question which doesn't take into account the objective of the "investor".
Does the share price matter? Of course it does. How do you measure your risk once holding? How do you measure your playing field once holding? A share that drops from $50 to 1cent probably cannot support the paying of a dividend if it has cash raising problems to support the divident payment in the future when its reserves are running out.
What's my risk?
This is a classic example of a question which doesn't take into account the objective of the "investor".
Does the share price matter? Of course it does. How do you measure your risk once holding? How do you measure your playing field once holding? A share that drops from $50 to 1cent probably cannot support the paying of a dividend if it has cash raising problems to support the divident payment in the future when its reserves are running out.
What's my risk?
tech/a
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Re: Does Share Price Really Matter.
Lets say
12 mths ago you were 60
You had $1,000,000 in stock and recieved $60,000 a year in dividends.
The average wage is $55K/Yr.
In 7 yrs time your 67 your porfolio is now worth $600,000
you recieve $36,000 in dividends.The average wage is $70,000
Does it matter!
Winners invest like winners.
Losers invest like losers.
Youve never made a loss until you sell!
Think again.You've made a loss alright and it hurts.
If you had a business which paid you a wage year in year out and the value of the business fell 50% in that time---doing nothing then is good business?
People fail and will continue to fail with flawed concepts such as that which your suggesting.
Ignore capital erosion at your own peril.
The worst decision of all is NO DECISION---one which most make when any decision will hurt.
Lets say
12 mths ago you were 60
You had $1,000,000 in stock and recieved $60,000 a year in dividends.
The average wage is $55K/Yr.
In 7 yrs time your 67 your porfolio is now worth $600,000
you recieve $36,000 in dividends.The average wage is $70,000
Does it matter!
Winners invest like winners.
Losers invest like losers.
Youve never made a loss until you sell!
Think again.You've made a loss alright and it hurts.
If you had a business which paid you a wage year in year out and the value of the business fell 50% in that time---doing nothing then is good business?
People fail and will continue to fail with flawed concepts such as that which your suggesting.
Ignore capital erosion at your own peril.
The worst decision of all is NO DECISION---one which most make when any decision will hurt.
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Dividend stability and daily share price are different measures of value using different timeframes. Falling shareprice is generally an indication of deteriation the underlying fundamentals of a company which mean future dividends could be threatened or, at least, future dividend growth is likely to be curtailed.
Julia
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Might be a good question to put to the people who had shares in Lehmans.
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If your retired, and have no other source of income other than over 50-100K+ a year in dividends, and confident that the companies are able to sustain this, then a very valid question ... why would you sell to cut off an income stream, and then face a capital loss.
Growth and maintenance (let's forget inflation here ... I would hope the dividends are more likely in the 100K mark) are different goals. If your life expectancy is only another couple of years (lets use 20 as a possibility for someone in their 70s), then you would seriously have to wonder.
I think Nick Radge had something in his free section (can't find it now) about share collecting, and dividends. Anyhow not something to consider lightly, and also to give a quick reply to without knowing someones personal circumstances.
Growth and maintenance (let's forget inflation here ... I would hope the dividends are more likely in the 100K mark) are different goals. If your life expectancy is only another couple of years (lets use 20 as a possibility for someone in their 70s), then you would seriously have to wonder.
I think Nick Radge had something in his free section (can't find it now) about share collecting, and dividends. Anyhow not something to consider lightly, and also to give a quick reply to without knowing someones personal circumstances.
The key word is "generally". Fundamental analysis is necessary in the choice of a stock more now than ever before. Good stocks will rebound.
The financial institutions that operated in a manner similar to pyramid selling were bound to fail.This period of instability should weed out the nonproductive sections of industry and business. Those that chose to listen to the snake oil salesman will lose out. They have my sympathy. Many are my friends. Some made the mistake of putting all their eggs in one basket and if Lehmans was the basket it was a serious mistake. Always easy to be wise after the event.
Re: Does Share Price Really Matter.
Risk is a different kettle of fish. Each day I check to see if the stocks I hold are good value on that day. A lot of mine have become better value as the price falls and I see no reason to panic and sell. Rather I see reason to buy more at times. At times I sell some at a loss because there is better value in another stock because the other stock has fallen too far.My overall portfolio is worth less now than six months ago but I own a lot more script.
The value will return. IT WILL RETURN. I will still be holding. Fundamental analysis, can I mention it again? Oh! and spread the risk. There are good stocks out there.
Risk is a different kettle of fish. Each day I check to see if the stocks I hold are good value on that day. A lot of mine have become better value as the price falls and I see no reason to panic and sell. Rather I see reason to buy more at times. At times I sell some at a loss because there is better value in another stock because the other stock has fallen too far.My overall portfolio is worth less now than six months ago but I own a lot more script.
The value will return. IT WILL RETURN. I will still be holding. Fundamental analysis, can I mention it again? Oh! and spread the risk. There are good stocks out there.
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Re: Does Share Price Really Matter.
Nioka,
Cheers....
Nioka,
Really ? How?
How do you do that?
So the price does matter which is what I derive form your post.
So price does matter.
Really? Is there a guarantee signed by the market operators? Or the companies you are invested in?
Sure.
How?
Why? Value? Because price is low? Because fundamental analysis says so?
Cheers....
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Nioka in general I agree with your strategy/sentiment here - though only for actual dividend paying stocks. Also (as you've pointed out) the stock has to be reviewed regularly for fundamental soundness within the prevailing macro-economic environment and should also be contrasted against the other opportunities out there (including cash, bonds, property etc.). Fundamental risk to future incomes need to be priced in as they arise and incorporated into the value assessment. But for dividend paying stocks in stable, growing businesses the share price doesn't matter and increasing the investment on low prices makes sense. The mistake a lot of people make is to not take an objective view of the fundamentals. If the fundamentals change then its important to sell. Similarly a lot of people also don't buy because the price is down, even though the fundamental outlook changes and improves.
The only thing I disagree with is that prices will recover - value discrepencies can last for an extremely long time (i.e. decades). But as long as the income is there and the fundamentals remain sound within the prevailing macro-economic and sector related context, the price would still be irrelevant, even in that situation. Income growth is important as well not just income stability.
The only thing I disagree with is that prices will recover - value discrepencies can last for an extremely long time (i.e. decades). But as long as the income is there and the fundamentals remain sound within the prevailing macro-economic and sector related context, the price would still be irrelevant, even in that situation. Income growth is important as well not just income stability.
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Though of course the ideal would be combining the two and recognising the technical indicators that flag an impending sentiment change or changes to capital flows, and sell to buy in post the sentiment change (or vice versa).
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Thats a very good point - and I must say I actually agree!! Now let me make this qualification - first, share investing should be seen as a long term investment - which is about 5+years, now fast forward 5 years or so, and if those two companies are pretty much where they are - then yes, it does matter - and one should sell the stock if the future of these companies do not look bright.
However, I personally would not sell just yet, especially MCR which has no debt - now this does not mean these share prices are ever going to get back to when you bought them.
The problem with this perspective is the opportunity cost of money, which means, if these positions were liquidated the funds could be used to buy other attractive share classes, like your blue chip banks which most would agree have been sold off and under valued.
Cheers!
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Woah there! I definitely am one that does not agree banks would be a good place to invest money right now and they definitely don't match my criteria of a sound fundamental investment in the current macro economic environment. I may be be shown to be wrong on this but the last place I would invest money right now is in a banking stock for reasons I've outlined in other threads and won't repeat here. Their current income stream is fraught with major risks as are their asset bases and capital sources. The likelihood of significant income growth is highly unlikely and the likelihood of a significant erosion of profits and in fact of them reporting losses over the coming years is very high. (in my very humble opinion).
Bank stocks are not at all in my portfolio and I can see no reason to add them.
I still find some oil stocks attractive,especially those with good prospects of new discoveries and those with discoveries about to be commercialised. Also some coal seamers. I've been adding ADI, AUT, EKA, and BUL in the last couple of weeks. Taking a calculated risk.
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nioka;[B said:
It does if the company wishes to raised capital by share issues. The lower the share price, the greater the dilution could be. This in turn could negatively affect dividend payments.
Often the dilution of the profits by the costs of borrowed finance far exceeds the dilution through capital raising share issues. Part of Centro's problem.They left it too late to raise capital through the issueing of new shares. That is one time where share price really does matter.
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to some extent, i think share price is indicative of market sentiment and not true fundamentals.
at the moment, market sentiment for most stocks are down the drain.. but fundamentals still there
so i don't think SP matters if you are taking a long term approach.
those who sold in the 87 crash were the ones who lost! the ones who held did alright! (read it in some book)
at the moment, market sentiment for most stocks are down the drain.. but fundamentals still there
so i don't think SP matters if you are taking a long term approach.
those who sold in the 87 crash were the ones who lost! the ones who held did alright! (read it in some book)
That is without doubt. The ones who bought then did even better.
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Absolutely true, on both counts. It does beg the question - how long until quality stocks rebound? Is there an opportunity cost that is higher than the dividend stream generated by a portion of your portfolio? Is there a CGT event triggered by any sale of long term assets?
Good topic although it tend to reveal more questions than answers.
