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Dividend yield or capital gains - what's your choice?

+4
Antonym
WildBear
anubis
Fresher
8 posters

Go down  Message [Page 1 of 1]

Fresher


Moderator
Moderator

With this discussion, I would like to ask this.

Assume PLC reaches 20/- (which is still less than 2x PBV)

If it declares 0.50/- quarterly dividends in the future (Then most likely it will go beyond that price too), then it will be a dividend yield of approx 16% at current prices (after tax)

If a person has bought in the last few weeks, then he/she will have unrealized capital gain of approx 80%

In such a case, will you exit booking capital gains, or will you hold for it's dividends?

Not only in this case, but for all high dividend stocks. First I faced this situation with CTC

anubis


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Very good question, I also had the same doubt...

My strategy is to hold that 80% of shares no matter what happens... I think it mostly depends on what kind of a person you are. If you are a good trader, then you may be able to predict ups and downs and be able to make massive capital gains by selling all shares at the right time and buying them back again when the time comes...

But I have realized that I absolutely suck at predicting market moves... so I'll be happy with the dividend yield from that 80% lot of my shares. The remaining 20%, well, I might try to do some swing trading... just to see if I can make it work... Wink

It'll be very interesting to hear what others have to say in this regard, please share your thoughts Smile

Cheers!

Fresher


Moderator
Moderator

anubis wrote:Very good question, I also had the same doubt...

My strategy is to hold that 80% of shares no matter what happens... I think it mostly depends on what kind of a person you are. If you are a good trader, then you may be able to predict ups and downs and be able to make massive capital gains by selling all shares at the right time and buying them back again when the time comes...

But I have realized that I absolutely suck at predicting market moves... so I'll be happy with the dividend yield from that 80% lot of my shares. The remaining 20%, well, I might try to do some swing trading... just to see if I can make it work... Wink

It'll be very interesting to hear what others have to say in this regard, please share your thoughts Smile

Cheers!

Yes, it depends on individual strategies. But I think you misread my post.
The 80% I mentioned is the unrealized gain from one particular stock. Not the holding in the total portfolio Smile

WildBear


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

We mut embrace a business which can give you annual dividend yield of 16%. You can use the cash flow to re invest in other stocks.

anubis


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Sorry, I was referring to my 80% : 20% rule... (80% holding, 20% for swing trading).

I wouldn't look at the unrealized gain... Wink

Cheers!

Fresher


Moderator
Moderator

WildBear wrote:We mut embrace a business which can give you annual dividend yield of 16%. You can use the cash flow to re invest in other stocks.

Ideally yes.

But the truth is the price will not be at that level anymore to give that yield. Although YOUR yield at your cost would be 16%, the price would eventually increase to result in a yield of 4-8%

At this point, you may find another stock which you believe can give a better capital gain in the future, or a stock which would give a better dividend yield considering the price at the time.
Further, it must be noted that not all companies will continue paying a stable dividend forever.

Fresher


Moderator
Moderator

I split the thread since I thought this could become a worthy discussion and not totally related to the other topic Smile

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics

When investing in equity, my primary objective is capital gains.

I look at dividend yield as a defensive strategy, like: If Share X offers a consistent dividend yield of 10% at current price, there's a limit to how low the price can drop.



Last edited by Antonym on Thu Jun 14, 2012 10:11 pm; edited 1 time in total

anubis


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

@npp, if I may ask, when did you buy CTC and what was the share value at that time?

May be another thing to consider is long term growth... if you hold PLC / CTC / NEST for another 20 years, what will be the value of those shares? I think these companies have no other direction but to grow... and I think you'll be able to give your son / daughter a massive amount of money if you plan like that (but I don't have that much experience, only guessing).

On the other hand, LLUB also gives regular dividends... but can you be sure that it will grow massively in another 20 years? (May be same applies for CTC?)

So, I guess long-term growth also needs to be taken into account in this situation. Just an opinion.

Cheers!

Rizmi

Rizmi
Manager - Equity Analytics
Manager - Equity Analytics

My personal strategy is Capital Gain..
In this market the dividend yield is not comparatively attractive..

hunter

hunter
Moderator
Moderator

I think the answer depends on which stage you are in.
If you are in a growth stage, you're looking for pf growth aggressively; that means capital gain is preferred.
On the other hand, if you have a considerably big pf, then you're more worried about the security/safety of your pf rather than gains. Then you'd prefer keeping your money with stable, regular dividend paying counters.

I am right now at the pf growth stage.

yellow knife


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

p silent q and d

continue buying more quantitiy of the shares that deliver more dividends and forget the price...thats my strategy these days...smll, peoples, tjl are on collection

glad


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

May have to consider that the share prices move & down for various reasons, not only because the company is doing well or not.
When you get dividends you are sure of getting something in hand, and if you dont need it for other purposes then you can reinvest in the same stock, and if the price is low you purchase more shares and at the right time you can sell the additional shares you purchased if you need to.
Just a thought

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