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Read some articles recently about certain fund managers suggesting that the UK stock market is being held back by the obsession with dividends when the companies can use the distributable profits for buybacks or retain them for expansion.
It’s certainly true that growth stocks tend not to pay dividends or pay smallish ones so they can retain capital for growth. Mature companies tend to be more inclined to pay them to keep shareholders onside but do we really need them if we are get better capital growth instead without them ?
I’m ambivalent about it. I like dividends so I can use the cash to make new investments but it’s not difficult top slicing either to do that. I receive income from bonds in my ISA and SIPP which should form part of most portfolios (unless you are a risk seeker and gamble all in on equities). I personally use a 2/3 equity and 1/3 bond & cash mix.
The US market of course hardly pays dividends tending to favour buybacks or retention to grow the businesses. So do we really need equity dividends ? I’d be interested to know others thoughts.
This short article a few months back puts dividends into perspective.
https://www.morningstar.co.uk/uk/news/235109/is-it-time-to-ditch-the-dividend.aspx
I think there is certainly a valid argument for getting rid of them but also think the UK market is being held back by smaller economic growth rates when compared with the USA for instance.
I have invested quite heavily in India this year where the average age of the population is just 29 and I see growth is going to be prolific. Most of the funds I have bought (9 in total) do not pay dividends as they invest in companies that retain profits to grow their companies.
Be interested in what others think about dividends……
G13b
''Be interested in what others think about dividends''
Investments in the likes of apple and amazon which i did very well out of, having invested early on in their growth story helped to give me financial independence from any employer . Growth stocks need time,so now at an older age, I am content with mainly mature dividend paying stocks giving me very regular income for further investment fun of my choosing.
Fair comment LTI.
The other option of course is to top slice from shares whose valuation is higher because they don’t pay out dividends…..
G13b
''top slice''
I do that with with my stocks all the time, if my share holding is in excess of what I deem to be a core amount.
Growth in capital values is also possible with under valued dividend paying stocks on eventual re ratings.
I have made 4 top slice sales of lloyds since the under 24p low and also top ups.
The first of the top slice Lloyds sales was at about 35p after a large purchase at under 24p
Misread - i made a 35p sale before it went to 24p - first sale after the 24p low was at about 40p
Anyone else with an opinion on dividends ?
Whilst Lloyds is being way undervalued by the market, i would be happy for the dividends to be completely ditched in favour of a 4- £5 Billion yearly buyback, until a nearer to a fair valuation is reached of lets say £45 Billion, before resuming dividends.
LTI, I did ask the question, "how long would that take" some time ago. Realistically how long would it take?
D....
What would the share price be at valuation of £45B? 85p plus?
S123
try thinking - current value about £27 Billion, with about 63.5 Billion shares in issue.
I made a comment about much larger buybacks instead of dividends - the price per share with a £45 billion valuation, would be determined by the number of shares in issue.
A £4.5 Billion buyback at the current price per share would obviously be able to cancel over 10 Billion shares.
The BOD should seriously consider increasing the amount allocated to buybacks
LTI "Whilst Lloyds is being way undervalued by the market"
The market does not over or undervalue a share. Its the true value given sentiment and a dog crap vision for a bank in a digital world.
Not good at Math, that's why we have you LTI?
S123
probably about 72p on the current share count
S123
£2.25 per share with 20 Billion shares in issue - needed more money put into buybacks
Lti
""The BOD should seriously consider increasing the amount allocated to buybacks""
I'm sure Charlie Nunn will abuse his position as the CEO and strongly recommend another buyback program to boost short term EPS and hitting bonus targets for the banking executives, the share price has had a nice rally over the last few days with shareholders reinvesting there dividend payments, if the bank scrap the buybacks and up the dividend just imagine all the new investors buying in and reinvesting the divi money share price would shoot up
BLB
who let you out of the box
''The market does not over or undervalue a share''
did you not know? - that is a matter of opinion.
LS
'' if the bank scrap the buybacks and up the dividend just imagine all the new investors buying in and reinvesting the divi money share price would shoot up''
FFS, not again - how many more times ffs - do you not learn anything
"Whilst Lloyds is being way undervalued by the market, i would be happy for the dividends to be completely ditched in favour of a 4- £5 Billion yearly buyback"
Many people who rely on their Lloyds dividends for income would probably take a different view.
Well played if you sold high at over 43p today. Beating MMs at their own game ☺️🍿
Thanks LTi, wouldn't that be nice, perhaps the BoD could increase the BB next year to 3B and the YE divi to 2,2p, it seems a balance to me but I really do see your point..👍👍 There should be a few few shilling floating around next year..
If Lloyds want to reduce the shares in issue, they should do a 1 for 3 reverse split and aim for around 20 Billion shares in issue, increase the dividend in line with the split so investor income isn't impacted, and only use buybacks to maintain stock levels after block listings. Buybacks make little sense with sixty odd Billion shares in issue, with many long term shareholders feeling aggrieved that Nunn hasn't restored the dividend to pre covid levels, and are suspicious that buybacks are more advantageous to Lloyds Bank Board Members and senior management than shareholders.
No thank you
Another 10 year's of buy backs please
Dividend is good here anyway
Long term , buy backs will reduce number of shares without my investment be cut and split up into pieces
Short term traders will rip us apart if we done 1 for 3 reverse split IMHO
New TV advert needed : Yanet Garcia sat on Horsey