RE: Gerry5578 Jun 2018 22:03
danielh, Divi v No divi argument has merits on both sides. It depends on what the company can do with the cash and the investors own personal preference. Ideally the company should reinvest its cash to make a better return on the cost of that capital. I.E. buy a new factory and churn out its wigits at half the price of its rivals, take bigger market share and make even more profit. It could also buy back its own shares, saving you the dealing costs and your slice of the pie gets bigger at no cash cost. Buffets fund might be a good example, he doesn't pay a divi.
My issue is that should my shares fall, without a divi there is no cash to buy more. With a divi you get cash back, its effectively a small, fee free sale. That cash can be used to buy more, when the SP falls. Remember I wasnt buying in the 240's. Those divis go to the "pot" to be reused wherever I see fit. It doesn't have to be Vodafone in fact todays buy was SLA, another high divi payer. The cash could of course be used for anything, wine, women or song instead of wasting it on shares. I dont auto reinvest.
Personally Im not a great fan of buybacks. Often done at the wrong time and improve the boards pay and not shareholders returns. In fact Vince Cable says its legal fraud in a recent times article. I think Im better at investing my money than the BOD who we pay to run the company, not for their investment advice. How many firms did massive buybacks but stopped during the crash only to come begging shareholders for more cash! Wasteful Buffet rarely does buybacks but when he does its because it adds value.
I suppose a divi can also be your pension income should you need it and with interest rates so low there is little value keeping excess cash that is being eaten away by inflation. Hopefully the divi will grow faster than inflation.
Yes Im happy with the Vod divi and hopefully it keeps becoming more affordable as it grows.
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