Dividends, love them but careful


Simon Shares

  • US June inflation 9.1%, core inflation also up a 5.7%!
  • Still stage 4. Rand continues to weaken.
  • Back backs between 4 July 2022 & 8 July 2022
    • Naspers JSE code: NPN) bought 659,095 shares at an average price of R2 648.3315/share for R1.745 billion (US$104.73 million).
    • Prosus (JSE code: PRX) bought 6,240,339 PRX shares at an average price of €67.1361/share for €418.95 million (US$428.59 million).
  • SARB now considers cryptocurrencies as a financial asset and will create regulations around them. This means cryptocurrencies can be listed on SA exchange platforms but the process will take 12-18 months.

Dividends, love them but be careful.

  • But we also need to remember a few important things about dividends.
  • They can disappear as we saw in 2020. Even the most stable dividend payer can stop paying. REITs which have to pay them by law being a REIT structure) stopped paying because payment would see them fail their solvency tests.
  • They are backwards-looking. A high dividend yield is certainly attractive, but is it because the price has been falling? Could this be a warning of a dividend cut?
  • Cyclical stocks (think commodity stocks) pay massive dividends sometimes, then nothing for years.
  • Boards can change the cover ratio. This is the percentage of HEPS they pay as dividends. In tough times they can cut them. As the company matures they pay more.
  • Progressive dividends are the worst. The idea is that every year the dividend goes up a set percentage regardless of profits. A few local stocks have tried the idea, all have abandoned the idea.
  • Cash dividend vs. script dividend. I’ll usually take the script.

Dividend portfolio paying monthly

Dividends explained

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Simon Brown - Just One Lap founderThursdays are all about hard-core investing with Simon Brown’s famous JSE Direct podcast. JSE Direct started life on ClassicFM in July 2008 and became a podcast in 2011. Every week Simon chats to industry experts, answers listener question (contact him here to send your Q’s) and gives his views on the state of markets and individual shares.

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Image and article originally from justonelap.com. Read the original article here.