Is it time to get on the banks?

In five years it will be significantly higher.

 

What the.....holly molly -wow thats really optimistic....good luck to 'em

 

As a member of society I think it’s excellent they are looking out for the general public by raising deposits and lowering rates for borrowers. In tough, uncertain times every little bit helps.
As a share holder again I am happy with the choice. Sure it will impact short term but let’s look a little longer, could be a fantastic way to gain a greater market share, great to entice more deposits which will help balance books and just expand customer base generally.
Short term may not be favourably but long term could be a stroke of genius.

Regards
CBA shareholder & customer

 

CBA is just resting on the long term trend line. Should have a nice bounce here before retesting further support down lower.

 

As of 4:30pm AEST

ANZ: close $14.85, 49.32% down from a 52 week high of $29.30
CBA: close $57.00, 37.40% down from a 52 week high of $91.05
NAB: close $14.40, 52.00% down from a 52 week high of $30.00
WBC: close $14.51, 51.71% down from a 52 week high of $30.05

https://www.marketindex.com.au/asx/anz
Commonwealth Bank of Australia
National Australia Bank Ltd
Westpac Banking Corporation



I joke, but I peeked at my super balance today. Ouch! The upside being it's a great time to sal sac into super.

 

Why is that and what will that achieve ?

 

There are many tax advantages of doing this. He is suggesting to do it at this time, prices are cheap and the benefits of growth + tax breaks will make it a big winner.
Not my advice

 

NAB was trading at 12.04 on the 1st of October 1993...It's heading back there nearly 27 years later

 

It suits my investment strategy and salary sacrifice is a tax effective investment option.

My super is measured in units and each unit has a value.

Previously when I contributed $1,000 to super I got around 283 unit. When I contribute $1,000 today I get around 351 units.

Pretty much my $1,000 is worth $1,240 when unit prices return to normal.

For me it will achieve a much higher super balance when I retire in 10 years.

Not advice.

 

I have always thought about SS but never looked it into...will check with Aussie Super and find out how it works before speaking to my work

 

You don't need to check with the Super fund itself. Just notify your payroll team and they should send you some kind of form in which you need to state the amount of volunteer contributions. Just make sure that the total amount of employer + volunteer contributions doesn't exceed $25,000/year.

 

You have a max of $50k this FY as any unused cap of $25k from last FY was carried forward

 

G'day all,

I'm brand new to this whole share trading thing and was looking at buying some CBA shares (approx 4k worth) as my first investment as the banks seem to be a safe place to start and CBA seems to be talked about as the way to go and what everyone measures off. I was hoping someone might be able to shed some light on why this is the case though?

Looking at NAB as a comparison, the higher dividend yield and significantly lower purchase price appears to make it a better option, especially as this initial purchase would give me over 250 NAB shares compared to only 66 CBA shares at current prices.

I'm clearly missing something so am hoping someone can point me in the right direction.

 

The number of shares you can purchase for the same capital outlay is irrelevant.

 

First lesson is share prices are a prediction for the future, share prices follow earnings, which are very different to dividends. Low share prices make past dividends look high , paying dividends reduces capital and hence share prices. NAB share price is low because its because earnings will fall and a dividends may not even be paid in the future. You need to look at FUTURE earnings, if you look at MQG you will see it has given a return on equity of an average of about 15% p/a for the last 5 years, if you must invest in banks that is one I would consider it is diversified and global, the next few reports may not be great, but it could out perform in the long term. If you want safety and good dividends I suggest RFF, if you want ever growing dividends and growth I suggest look at something like DDR, If you want to get access to some simple low cost diversity and high total returns from investing in the best companies in the world, ran by the smartest people in the world that have given some the best returns in the world not only this year but for years previously consider NDQ, for a little more safety for for a little less performance consider UMAX or YMAX. As for share price, the cake is the same weight no matter how many pieces you cut it into, the cake will get smaller if you eat some pieces, if you swap the pieces for more ingredients you can add more layers.

 

Thanks for taking the time to make such a detailed reply, I'm still trying to wrap my head around all this sort of thing so it is greatly appreciated.

Just so I'm on the right track. The companies, regardless of industry, paying higher dividend yields are subsequently reducing their working capital and therefore their share price. Does that just mean that companies with higher share prices are likely just using more of their earnings to reinvest into the business operations to ideally bring higher growth instead of distributing to shareholders?

Looking at those last few recommendations you mentioned, being ETFs, from what I can gather they seem to be the easiest way to diversify and reduce the risk of investing in a single company or industry. Maybe that might be a better way to go to keep it simple. Is there any real benefit to purchasing more US based ETFs like the ones you suggested over Aus based ETFs? Or is it just to get more global exposure?
The ETF thread here on PC seems to always heavily rate Vanguard ETFs such as VAS so I've been looking in to them as well. It just appears that with the market taking such a hit recently, now may be as good of a time as any to get my foot in the door and start putting some savings into the market on a regular basis over the long term

 

You're heading in a good direction, and you're asking the right questions.

Read this entire website, and then come back with more questions that you will undoubtedly have: Passive Investing Australia

You'll probably do best with either VDHG (basically all you would want in a single package), or a combination of VAS/VGS. Limit it to 2-3 ETFs for simplicity.

You are partly right in that companies paying a dividend are reducing their working capital, and its share price drops by an equivalent amount. Lower dividend = more money to reinvest in the business.

But it's not that a company with a higher share price pays a lower dividend. The price of one stock cannot be directly compared to another.

Let's say you have two companies (A and B), each worth $100.

Company A is split between 100 shares, meaning each share is worth $1.

Company B is split between 20 shares, meaning each share is worth $5.

Both companies are still worth the same, even though the share price is different. If I buy $50 of each company, I would have 50 shares of Company A or 10 shares of Company B. I have a different amount of individual shares, but the value is the same.

Owning 1 share of Berkshire Hathaway that is worth $279,460 is the same as owning 279,640 shares worth $1.

Think about dividends. Company A paying a dividend of 1c per share is the same as Company B paying 5c per share.

 

Great reading - thanks for the link.

 

NAB

NAB asks shareholders for $3.5b to protect the bank against 'very uncertain times'

NAB seeks $3.5b from investors, cuts dividend as profits drop 51 per cent amid coronavirus-hit economy

 

I do not get this companies capital management actions at all.

Last report they had 2.7Billion shares on issue and 574K shareholders.

They closed Friday at $15.76 and make a $3 Billion placement at $14.15, a not insubstantial discount. This placement represents 7.1% of NAB’s shares on issue and will dilute current holders. On what basis is the placement allocations made? Why did they not protect current holders’ interests with a 'renounceable' rights issue? Is the need for capital really that imminent that they can’t afford a few more days for a renounceable rights issue?

The SPP is for 500M if each shareholder takes up the SPP they would need to scale back to just $871 for each shareholder, hardly fair when they have placed 7.1% of the company at a discounted price.

The 30c dividend equates to a distribution of 820M. Why payout 820M when you are raising 3.5B at a discount. Why not just cancel the dividend and raise only 2.7B and avoid some of the dilution?

The lack of shareholder capital stewardship unsurprising correspondence to their long term relative performance. (NAB is yellow)