Peter Thornhill 2018

Correct me if I'm wrong. Weren't payout figures for the LICs lower historically?

If you're right.

 

I'm right

 

My point was CBA is a cherry. If you can always pick em then that's what you should do. Question is what would you buy today to smash the LICs over the next 20?

 

Misses the point I think.

So which companies will have the best dividend growth over the next 20 years?

Let’s just buy those ones.

The answer is we can’t know.

Easy to look back and know. Not so easy to look forward.

So we should be happy with a diversified portfolio of 100 businesses from a range of industries that will deliver reliable dividend growth with much lower risk. While some companies will be doing great others won’t be.

This way you don’t have to think about the risk of one business or industry so much. The result is a simplified and diverse income stream that grows at a faster rate than rent over the long term.

 

I can't pick winners...most people can't. My point was that investing in LIC's is a slow burn approach. It takes time, consistency and large dollars invested to get you to retirement.

Ignoring any growth in the stock price (assuming you're in for the long term...for the dividends), the dividend increases are just over inflation.

 

You’ve just beautifully articulated the argument for capital weighted ETF’s.

 

CBA may well be higher then the 6-5%,once you add on the extra's ff's credits..

 

[/QUOTE]

Maybe one of the old fellas can comment?

From what I have seen the large LICs are paying around 95-100%. The underlying holdings are not paying out at that ratio, but the LICs are. You can see this when you look at index yield/franking and the FF yield on LICs or dig through the annual reports.

 

Yes, more like 8.23% for last 25 years

 

Maybe one of the old fellas can comment?

From what I have seen the large LICs are paying around 95-100%. The underlying holdings are not paying out at that ratio, but the LICs are. You can see this when you look at index yield/franking and the FF yield on LICs or dig through the annual reports.[/QUOTE]

If that were the case, I would wonder how they would have the reserves to smooth dividend payments through the downtown like gfc.

Maybe putting away 5% during the good years is enough to top up the bad years.

 

Paying out 98% per year leaves LICs franking balance to get larger and larger.

After 10 years you’d have enough franking to pay a 20% franked dividend (in theory).

All they do then to smooth it out is use cash to top up any shortfall from dividend cuts and tack on the franking with it.

That’s my understanding.

 

Nice little assumption I can now put in my long term LIC investment model. Thanks for that!

 

In response to this article:

Aussie shares: 50 years and we’re finally ahead - Cuffelinks

 

The stock price grows precisely because of expected dividend growth. If dividends did not increase stock price would stay fixed (all else being equal).

 

If you look at the stock price performance of AFI and ARG over the last 10 years, you wouldn't be happy unless you picked the bottom. It's a lot easier to pick the bottom of the property market vs the stockmarket/individual stocks.

 

I'm surprised Peter didn't throw some LIC's into his examples also

 

I meant to add in this earlier post of mine that of note is Peter T’s holding MFG. So although he says investing outside Australia is unecessary he invests in Magellan the ticket clipper as opposed to their Global Funds / ETFs.

 

Also has a dash of mff in there to spice things up too!

Just came to mind PT has a couple presentations with income solutions this week Tuesday and Wednesday I believe in Melbourne and Geelong, free event for 3 or so hours in the evening.

 

He he PT chasing capital growth, that’ll put a cat amongst the pigeons.

 

Thought I’d repost this article by Ben Carlson in the Thornhill thread as it gives some interesting stats on S&P 500 dividends. The stats show how incredibly stable dividends are relative to share price. Nothing new of course for those who have read any of Thornhill’s material:

The only thing I disagree with in the article is the following quote. I can think of nothing more comforting during a market crash than a relatively stable dividend:

The Incredible Growing Dividend

Of course compared to ASX dividend yields are much lower in the US partly due to double taxation of dividends. Others however might suggest that another contributing reason for a low dividend yield is a very overvalued market? Time will tell!

Finally I haven’t confirmed this data from Thornhill but if true it’s pretty impressive:

Sorry for boring you but inside taking it easy after a minor medical procedure. Posting eases the boredom of lying around.