Aussie "Dividend Aristocrats" and How to Find Them

Thanks again for passing down this knowledge.

At what price would you leave a resting limit order? A percentage below NTA? On specific LICS like AUI, DUI, CIN that are more volatile?

I am still far from understanding the best way to buy LICs. I have a list of LICs from which I will buy. Approximate the intra monthly NTA based on the rise and fall of the ASX. When a LIC falls below NTA and approaches 52 week lows I put in an order. Should I be looking at other criterion? E.g. the ASX 52 week chart? E.g. do you consider MFF anywhere near a buying opportunity as of today?

As has been said here, I don't think the price vs NTA is the only thing to consider. Market can be through the roof, price of LIC can be below NTA. But then a month later market can be down significantly, LIC could be above NTA, but its price could be lower. Obviously, given we are in it for the long haul the absolute lowest price is the best, whilst not wanting to wait too long and missing dividend opportunity.

Any strategies would be much appreciated.

 

Current MFF data:
- price 1.69
- 52 week low
- NTA PRE/POST tax 1.966/1.719
- 0.76 aud usd exchange rate (assuming that there is a bigger downside and because this an international LIC any decrease in AUD would increase share price).

 

MFF has a lot of options outstanding - read the NTA report in full....

 

@ErYan, I think you're overcomplicating things. Over 30 years ago Dixon put me onto a broker Joan ??? from Wilson HTM. She would tell me which LICs were at a discount and / or whether all LICs were overvalued due to overall market strength. A rare honest broker. However most of us don't need a full service broker nowadays.

Bear in mind also I've been referring to low turnover LICs such as the older ones. New breed "trading" LICs tend to turnover their portfolios much more rapidly hence NTA becomes somewhat meaningless.

Unless you're a trader / investor earning a living from this it doesn't have to be an exact science if ever there is such a thing.

Whether you use your 52 week low or a 200 day moving average price chart etc to determine entry points it doesn't really matter that much. As long term investors we ideally would like to buy at a discount but not when the market is running hot. Even without strict technical criterea it's not that hard to determine when irrational exuberance has set in.

As mentioned above it's not ideal to be buying LICs at a discount in a strong market. Better to pay a bit of a premium when the market is on the nose. Unlike the index, during times of gloom LICs are likely to be deploying cash into quality shares whereas the index is at the mercy of the market.

Just use common sense. In normal market conditions look to buy LICs at a discount. In a very strong market reduce buying to a minimum or not at all unless a favourite LIC is at a deep discount. During a market crash or major correction don't fret about paying a small premium to purchase high quality LICs. The Mgrs will likely be grabbing bargains on your behalf. The closed end nature of LICs work in their favour at these times.

 

Thanks to both you and Terry - looks like I've got some reading to do!

 

Brilliant post yet again @austing, may i ask as soon as you paid off your ppor how much were you allocating for investing in lic's and did it start as a 3 or 4 fund portfolio and then branch out over timre with increases in career income for yourself and your partner or did you purchase alot more lics from the get go to take advantage of the potential attractive SPP's and rights offers you always mention on this platform!

Just very curious how you allocated your money after you payed off the ppor at 26 i think!!

Any advice on how to stay the course for a L plated investor trying to accumulate holdings in the old school lic's for future income streams!

Once again you are a real asset to this forum!

Cheers!

 

My previous post states that there was financial disruption in our past and I did lots of stupid things. Expanding on those periods would be a story in WHAT NOT TO DO. If anyone choses to listen to me they would be better served listening to what I suggest NOW as a result of my experience NOT WHAT I DID during certain silly stages of my life. And even then it's only the ramblings of an ameteur. And what I do may not work for others given psychological aspects, circumstances and one's goals etc.

Investing is not so much about being clever but avoiding major mistakes. Progress would suggest than we learn from others mistakes / successes and as a whole investors get smarter overtime. The strange thing is when it comes to investing many of us seem intent on repeating the same mistakes over and over again. Boom, bust, boom, bust .... . Get rich quick schemes etc suck many in.

What I suggest here, if it feels right, is aimed at helping others avoid the mistakes I made. Does that mean it's right for everyone? Of course not. My voice is just one of millions having a say. If it helps someone out there retire better off / earlier I'm thrilled.

I would suggest that the simplier one's investing strategy is the better. Importantly the optimum strategy is not necessarily the best performing one. It's the strategy that lets you sleep well at night and one that you will stick with throughout your life through good and bad times. Chopping and changing investment approaches and exiting at the worst time based on fear etc will set you back and potentially negate one of the most important aspect of investing, compounding over time!

 

I agree with this (and probably applies to property investing too).

Here's a question for the older and wiser heads around here - something to think about over a few of your favourite beverages! How many major mistakes did it/does it require before you yourself learnt that minimising mistakes is probably more important than optimising your investment?

I'm reminded of the story of how the way to beat an amateur tennis player is to avoid mistakes, rather than forcing errors from your opponent.

For what its worth - I made what I consider 4 major investing mistakes before I settled down (although I will admit I might be in the midst of another).

 

Too many in that I lost count. I'm not sure most of us ever stop making mistakes. And I still continue to make mistakes. The mistakes are just much smaller than in the past in that they don't have a major impact on our investments anymore. Obviously the ideal is not to make any mistakes. But realistically as long as they're not major ones is the most important thing.

Finding an investing strategy that requires the least amount of decisions and actions can potentially reduce mistakes.

 

Still wrapping my head around trusts.

What would be the disadvantage(s) of having a company that is wholly owned by a trust for streaming the income in the future (and not having the initial trust)?

You wouldn't have the ability to pass on CGT discount - are there others? however you only use one company and one trust.

My current accountant is basic and all this seemed above his head while having a chat. Am I best off speaking with an (more qualified) accountant about this or a solicitor?

 

I think you might know the answer to this one already.

 

Had some time today so I created a list of current ASX200 companies that met a number of criteria mentioned around here a lot.

- Ex Mining, Materials, Energy, A-REIT
- Paid a higher dividend in the calendar year 2016 than 2006 (SYD was estimated for the 2016 calendar year)

Out of 200 companies I was left with 40, thought it might be an interesting starting point for some. I added SOL (talked about here) and left WES (cut its div from 2006) so there are 42 companies on the list.

I will be interested to see how these 40 (or 42) perform Vs the index over the next decade. Obviously the past decade of performance isn't really relevant as how would you has specifically selected these companies 10 years ago.

*I take no responsibility for the accuracy of the list, there are likely to be some mistakes.

 

Great work @Hodor. Will look through it.

 

Yes, good on you @Hodor for doing this.

@Hodor does this mean you're comtemplating switching to the dark side of "direct" shares?

Cheers

 

I am some way off that, something I still feel I require a few years of research to do! So working out if A I can come up with some ideas that work and B if I can make them work. I do believe that a small individual has a few advantages that can be taken advantage of if one is inclined, so when I have spare time I dabble with some ideas. Reading financial reports is still too much for me so maybe this is as far as I'll get.

Currently I am thinking about adding to LICs by selling out the miners I hold. Just don't know when is the right time, I nearly sold FMG at the start of the year at a quarter its current price!

Maybe all this time would be better spent learning to brew.

 

Can get darn addictive this stuff at times.

I've been heading in the opposite direction for sometime now. Down to only 8 "direct" share holdings. Another one to go in the next 12 - 18 months. The LICs are increasing becoming a significantly larger part of the total portfolios.

My only rediculously simple investing strategy going forward to boost performance and yield is through buying LICs well below their NTA on market or when discounted capital raisings occur. Ironically the strategy I started out on over 30 years ago and stupidly didn't stick with continuously. Take AUI's Rights Issue last year at $6.50 and discounted buying opportunities for a time after that. Still at a noticeable discount now for that matter. And with a crazy low fee of 0.10% why would I, as a long term low maintenance investor, bother messing around with direct shares. The Resource exposure doesn't excite me but the discounts more than compensate for this. At least they only hold the dividend paying major Resource stocks and not all the other speculative rubbish that's in the index!

But of course that's my view only and not meant to suggest that others can't do a lot better than this. No guarantees unfortunately though.

As for when to sell the miners I'm certainly no expert but perhaps some patience is required. They're cyclical beasts and you missed the opportunity to exit during strength in the last cycle. But like all cycles another will come. That's probably the time to sell. Perhaps you can take Peter Thornhill's approach when he purchased BHP in a moment of weakness. He deliberately left it in the portfolio to remind himself of his perceived stupidity and to never to do it again.

Yes the home brewing is recommended. Financially, emotionally and that good feeling in the stomach wise home brewing may be more rewarding than dabbling in direct shares. To balance the bad from the alcohol intake I'm onto the green smoothies for breakfast lately. Looks like vomit but tastes great.

Cheers

 

AUI is what I was thinking of flipping my FMG into.

Anything that keeps me on the right path with the majority of my holdings is a positive as I see it.

I do see good value in a few direct shares, including a couple that got cut from the 40. The value I see probably isn't based on enough to be making an investment decision however.

Interested on opinions on this - Of late I have been wondering if it is easier to cut under-performers than pick over-performers. For example, if you were asked to pick 20 stocks that would perform poorly and very unlikely to perform well (say bottom 20%) in the asx 200 and 20 that would perform well (top 20%) and unlikely to perform poorly, would it be easier to identify under-performers? - Not sure I explained my point clearly, hope some can get the idea.

 

I hope Santa has been paying attention!

If not will do some further research and shopping next year. Have investment income to reinvest.

 

If you have to ask that question (read it 5 times and still don't get it!) it is time to stick to nice and boring LICs.

In all seriousness, I have been where you are as well. I have a list of 15 direct shares I wouldn't mind holding in my portfolio. But then, I look at the reports that the LICs release and see that they are all in there too. So what is the point in me trying to take all that risk in managing those individual shares when I can get a manager with much more ability and resources than I will ever have to manage it for me? And for a tiny fee. As @austing says, time better spent doing more important stuff - like living.

I am training myself to take an aspirin and lie down whenever I get the urge to go direct.

As always not advice.

 

He he, great comment. Aspirin to prevent urge to go direct as well as selling.