Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Bald_eagle - the dividend is clearly sustainable. Earnings per share for 2022 were 38.33p with a dividend per share of 19.37p. There is currently no evidence the current level of dividend is under any duress.
Unless of course you know otherwise . . .
LOTM-13
I only used the companies as examples as they were the ones you referenced in your post.
You maybe right. I'm not convinced regarding the shareholder value of buy backs. Look at BP. Over the last 10 years they've bought back over 5bn shares costing close to $31bn. Their share price today is 1.3% higher than it was 10 years ago!
As I think I've said previously all that counts for me is total return. How a company delivers that is up to them.
Meoryou - I'm sure I'll pop in from time to time. It's generally speaking a nice board with plenty of opposing views and a diverse group of (generally!) well mannered people. I hope that continues.
I've no real complaints with my overall returns from either BP or Shell.
BP provided me a total return of 46% (16% capital / 30% dividends), and
Shell provided me a total return of 80% (45% capital / 35% dividends)
Now just seems to be the right time to move on. Time will tell. Good Luck!!
. . . to my directly held oil shares. Sold BP in Feb and have sold my total holding in Shell this morning. I've had a target sell price in mind of around £25 for some time now. I could have sold for that price earlier but for various reasons chose not to.
However, although the price I sold for today is below my target price a number of other holdings after yesterday's sell off are now at levels where (i) their dividend yield is more attractive, and (ii) they look as likely to deliver a 10% growth in share price as Shell does.
The result is I'll now enjoy a 12% increase in annual dividend payments, hopefully the growth prospects in share price are no worse and I have 25% of my capital from the sale to invest elsewhere.
I've held for years and have enjoyed a 45% return on my capital, a return of 35% from dividends so around 80% total return. No complaints and a sad goodbye!
. . . to my directly held oil shares. Sold BP in Feb and have sold my total holding in Shell this morning. I've had a target sell price in mind of around £25 for some time now. I could have sold for that price earlier but for various reasons chose not to.
However, although the price I sold for today is below my target price a number of other holdings after yesterday's sell off are now at levels where (i) their dividend yield is more attractive, and (ii) they look as likely to deliver a 10% growth in share price as Shell does.
The result is I'll now enjoy a 12% increase in annual dividend payments, hopefully the growth prospects in share price are no worse and I have 25% of my capital from the sale to invest elsewhere.
I realise it's Shell and not BP I'm talking about but it maybe of interest.
LOTM-13 - firstly, thanks for taking the time to respond in so much detail. However, the acid test for me is annualised total return over the longterm. That is dividends and share price appreciation / depreciation. That's all I'm really interseted in.
Looking at the example stocks you've used here's their annualised return over the last 10 years: BBY +6.27%, BARC -3.02% and VMUK -13.05% (this is a 5 year figure)
So, despite buy backs and dividends I'd have to say mediocre at best, appalling at worst.
An investment in a simple global equity tracker, ie Legal & General International Index, over the same 10 year timescale would have produced an annualised return of 10.91%.
Compounded the difference in return is substantial.
"Is that not obvious though? . . . "
No. Not really. If they're paying out 50% of the profits in dividends I'd expect the balance to be deployed in such a way to at least maintain the value of the business. At this share price we'll enjoy a dividend this year of c8.0% . . . the cost . . . a 10% reduction of capital!
. . . the more I think I'd be better off simply holding a global index tracker fund and selling capital as and when I need it.
Psycologically there's certainly comfort in receiving dividend payments but you certainly seem to pay a price in poor capital value.
I've yet to see any benefit to shareholders from buy backs. Maybe I'm looking at it all wrong.
Looking at the example given on a previous post the £450m cash to be used for a buy back currently sits on the balance sheet so is priced into the share price. The cash used for the buy back is removed from the balance sheet therefore reducing the value of the business. However, the shares are cancelled so the reduced value of the business is spread over a smaller number of shares maintaining the share price status quo!
As I say, I maybe looking at it all wrong!!!!
I'm now 70% by value in (non-dividend paying) funds and 30% in dividend paying holdings (2 shares & 8 investment trusts).
My dividend holdings are held in either an ISA or a SIPP. At the moment any dividends received in my SIPP are re-invested in funds and in my ISA are re-invested into the existing dividend paying holdings. I'll review at the end of the year. I'm retired so take income by simply selling down some fund units either quarterly or half yearly. I only drawdown outside of my ISA/SIPP in order to make use of the CGT allowance.
I've been investing for years. My top 5 performers over the last 5 year period are all funds: L&G Global Tech +143%, AXA Framlington Global Tech +90%; Fundsmith Equity +63%, L&G International Index +61% and Rathbone Global Opportunities +58%.
I probably know that I should sell my 2 remaining individual shares and either move into funds or top up my dividend paying investment trusts . . . but I've held both LGEN and Shell for years and find it difficuly saying goodbye to old friends. However, the 5 year performance doesn't stack up at +25% return from LGEN and -4% from Shell (with dividends reinvested)
Good luck.
Tambo210 - thanks. For global income (dividends) I'm invetsed in TB Evenlode Global Income, accumulation version. I don't think it will ever set the world on fire but it's been a steady performer for me.
Robleo - I've been slowly moving away from individual shares and using trusts for dividends and funds for non-dividend holdings (growth). I only hold 2 individual dividend paying shares now - Shell and LGEN.
I must admit I'd find it really difficult to let go of my holding here. However the data shows that over the long term a simple global tracker has outperformed LGEN
10 year annualised return for L&G Internation Index Acc is 11.55%, whilst LGEN has returned an average of 8.30% over the same time period. That 3.25% average annual outperformance certainly compounds over long investment periods. Good luck!
Crossley - Yes, strictlybricks has an interesting viewpoint / strategy that seems to be delivering for him (her) over the long term.
Here's my top 5 at the half year: L&G Global Tech +37%, AXA Global Tech +19%, LF Blue Whale Growth fund +15%, Rathbone Global Opps +10% and L&G Global Thematic +9% . . . and my laggards . . .
New City High Yield -9%, Henderson Far East Income -8%, L&G Global Infrastructure -8%, LGEN -3% and Merchants Trust -3%
So, the dividend paying part of my portfolio returned a loss of 3.9% ytd and the non-dividend element returned a growth of 10.2% Meaning that at the half year overall return is 5.5%. I'd have been better simply holding L&G International Index, or LGGG their global etf. Tons of diversification and a 9% return at the half year.
Strictly - I've just carried out a half year analysis of my portfolio. I hold 30% by value in dividend paying holdings and 70% is invested in funds that don't pay any meaningful income and returns are reliant on growth.
So, after 6 months my dividend portfolio (with dividends reinvested) has returned -3.9%, and my growth funds +10.2%. A combined total return of +5.5%. If this can be replicated in H2 I'll settle for that!
"Hi Neil I would definitely hold until Christmas.
It is always the strongest period . . . "
Neil - be careful. Here's data showing 2nd half year performance over the last 5 years:
2018 -18%
2019 -14%
2020 -18%
2021 +5%
2022 +23%
Now, there's always different views on data. My take is simply that 2021 / 2022 figures enjoyed the benefit of a tailwind as the share price was in 'recovery' mode and was simply heading by to the norm ie around £5.00
Looking at a 10 year graph £5 probably is 'the norm' Yes, there are periods when it will climb but it always comes back down. It's a classic share that the only way to make money is to lock in profit when available. Best results will not be achieved adopting a simple buy and hold strategy. But that's only my view. Others will disagree . . . strongly, looking at some of the year end share price predictions!!
Strictly - thanks for the response. Good to see you have a strategy that's working. I'm pretty much the total opposite to your very focussed approach. I've been moving away from individual shares into trusts and funds. Plenty of diversification for me across both sectors and geographies. I'm down to my last 2 individual shares: Shell and Legal & General.
However, just as you indicate, I do remain fully invested at all times. It's been uncomfortable but seems to have worked over the long term.
Good luck.
Strictly - you've certainly done well. I think you highlight (probably) one of the most important factors in investing . . . time!
I, also, am a long term investor. Certainly 15+ years. However, I've only been keeping really detailed analysis of my returns since taking early retirement mid 2018. My total annual return since has been as follows:
2019 +20.9%, 2020 +0.7%, 2021 +17.4%, 2022 -9.7% and 2023 to date +3.4%
Around 8 dividend paying holdings - 2 individual shares the balance in investment trusts, and around 15 investment funds for growth - a mix of passive index funds and actively managed.
Good luck