April 27, 2018

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High Costs for Poor Returns

Investing

I recently received a plea from a lady living in Thailand to warn people against a well-known locally-based financial adviser to expats for “locking clients into long-term investment products promising high returns, but in actuality delivering low returns and high fees.” [Read more…]

Billions moving into land buys

Farmland is essentially a long-term investment

Farmland is essentially a long-term investment

Farmland has risen in value at an average rate of 3.4 per cent a year since 1850 in the UK, and at an average of 6.2 per cent since 1967. Farm prices in the US have risen by 150 per cent in real terms over the past century. Some well-known private investors such as Jim Rogers, and some big institutional funds such as America’s TIAA-CREF, are moving billions into purchase of farmland in low-risk nations such as the US, Australia and Canada, and higher-risk areas in South America and East Europe. [Read more…]

The Key to Good Returns is Good Dividends

The Key to Good Returns is Good Dividends

 

Good Returns is Good Dividends

Good Returns is Good Dividends

Historically, income from dividends and growth in those payments have accounted for almost all the long-term return to investors.

In the US, over the period from 1871 to 2009, dividends accounted for nearly 90 per cent of the return to investors.

In various European countries, since 1970 dividend payments and dividend growth have accounted for between 80 and 100 per cent of investors’ returns.

“In periods when stock prices are falling, dividends provide a positive offset to the negative returns from continuing to hold on to shares,” says Allen Brooks, MD of energy investment bankers PPHB.

“Dividends, and especially dividend increases, represent positive statements by managers about the health and outlook for their companies.”

They are also one measure of the soundness of a company. Reported earnings can be manipulated using favourable accounting assumptions. Dividends cannot – they are cash paid out.

Of course, dividends aren’t everything. They may be financed out of extra borrowing (as BP is now doing) in anticipation of profits recovery, but that is something that makes me very uncomfortable.

And dividends may be reduced or not paid at all, so there is more cash available to management to finance expansion. Nothing wrong with that, in a growth business – providing you’re satisfied that money you would otherwise be able to invest yourself is being better invested by the managers.

CopyRight – OnTarget March 2011 by Martin Spring

Long-term Lock-up Investments

Long-term Lock-up Investments

Long-term lock-up Investments

Long-term lock-up Investments

My neighbor in Chiangmai, the well-known investment adviser Marc Faber, recently asked a panel in Moscow: “If tomorrow you were supposed to go to jail for ten years and were allowed to make only one investment, which you would not be able to touch for this period, what would you choose?”

High-profile American commentator Nouriel Roubini opted for a basket of stocks of Western multinationals geared to benefit from emerging markets. Nassim Taleb (he of “black swan” fame) suggested land in his native Lebanon, a country he said where every political party respects property rights. Scott Minerd of Guggenheim Partners chose works of art. Maria Gordon of the giant fund manager PIMCO preferred some large, high-return emerging-market stocks. Russel Napier, the well-known CLSA strategist, went for a basket of Asian currencies. Another UK figure, Hugh Hendry of Eclectica Asset Management, opted for tobacco stocks. Faber himself stuck with his favourite investment – gold.

My choice for a ten-year lock-up? Gold is tempting, but my choice would be Industrial & Commercial Bank of China , which is accessible to international investors through a listing in Hong Kong (the ticker is 1398).

It’s the world’s biggest bank by market capitalization, and is still largely owned by the Chinese government – so there’s no default risk. It currently offers a dividend yield of around 3.4 per cent, nearly three times covered, in the Chinese currency, which seems destined to be one of the strongest over the next ten years.

Unlike just about any of the world’s other major banks, it has had a strong and consistent record of earnings growth.

CopyRight – OnTarget February 2011 by Martin Spring