NORMAN ROTHERY
Special to The Globe and Mail
Published Friday, Nov. 08 2013, 7:29 PM EST
Last updated Friday, Nov. 08 2013, 8:46 PM EST
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I'm wondering out loud, but wouldn't another reason for a company to issue new common shares could be that their payout ratio is too high and they can't cover their payments to shareholders for their usual dividends from either earnings or cash flow?
Taggart wrote:I'm wondering out loud, but wouldn't another reason for a company to issue new common shares could be that their payout ratio is too high and they can't cover their payments to shareholders for their usual dividends from either earnings or cash flow?
I don't follow. Issuing new shares hurts, not helps, in the situation you described. They have to pay the same nominal dividend to more shareholders. It only helps if most shareholders choose to DRIP.
I think what Taggart was meaning was they issued extra shares to raise cash to cover payouts to shareholders or to replace the cash that was used to pay dividends. A short term solution that costs more in the long run as the number of shares go up. You can keep diluting your shares. It may be a short term solution to a short term cash crunch but you are right - it wont work longer term
Taggart wrote:I'm wondering out loud, but wouldn't another reason for a company to issue new common shares could be that their payout ratio is too high and they can't cover their payments to shareholders for their usual dividends from either earnings or cash flow?
I don't follow. Issuing new shares hurts, not helps, in the situation you described. They have to pay the same nominal dividend to more shareholders. It only helps if most shareholders choose to DRIP.
ig17:
You could be right, but my thinking is that they keep issuing new shares annually in order to cover their shortfall in cash to pay their dividends to shareholders. A couple of other ways I can think of are to increase long term debt, or cannibalize the assets or a combination of all three.
Again I'm just guessing, because the money has to come from somewhere.
The idea of indexing with indivdual stocks is part of the stragety I use in my portfolio. The stingy investor site has a calculaor which compares costs of ETF's and individual stock purchases.
To bad there wasn't a calculator which you could imput your sector percentage/or dollar amount and it would tell you how much of each stock to buy. A sliding bar would be nice to be able to vary the percentage of the index to replicate maybe based on another dollar amount or percentage in each stock.
For example if I would like to have $50000 in the materials sector in XMA it would output
POT $15,730.00
G $10,530.00
ABX $9,425.00
AGU $7,280.00
TCK.B $6,630.00
$49,595.00
For this amount of money it would maybe stop at the top five in XMA.
Cost to buy $50
Cost to own the ETF over 25 years with 10% growth $28417.71 at 50% replication.
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
So Norm sent out an email last night discontinuing the Stingy News Weekly, which I have received for a good many years, blaming the new anti-spam rules.
Many thanks to Norm for the weekly emails.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
kcowan wrote:I had no idea that the anti-spam legislation prevented opt-in mailings.
Well, not quite. It just entails a huge amount of accounting/paperwork and if you make a mistake you could be fined up to $10 million. Sort of like playing a negative lottery.
kcowan wrote:I suppose we can see the weekly missives on your web site?
Does this mean I can suggest to the annoying Edmonton RE agent he should consider removing me from his mailing list or pay $10 million? Ideally to me. I've tried to get removed several times. This wasn't even opt-in.
peter wrote:Does this mean I can suggest to the annoying Edmonton RE agent he should consider removing me from his mailing list or pay $10 million? Ideally to me. I've tried to get removed several times. This wasn't even opt-in.
If you mean email list and you haven't bought something from him then he needs your consent and has to provide a simple opt out. I don't know about you getting the $10mil tho.
A bunch of small businesses are going to get pounded by the rule over the next little while.
kcowan wrote:Yes Norm, thanks for including us in all those mailings. I had no idea that the anti-spam legislation prevented opt-in mailings.
I suppose we can see the weekly missives on your web site?
So sad to hear about this. Not surprising that regulation of trade means the suppression of trade, however -- a mordida disguised as a tax in the public interest from which only a few public servants benefit in terms of greatly expanded employment opportunities ...
Getting a bit off-topic ... but in case anyone's interested, here is the low-down on the regulation guidelines from the CRTC: http://www.crtc.gc.ca/eng/casl-lcap.htm
parvus wrote:
kcowan wrote:Yes Norm, thanks for including us in all those mailings. I had no idea that the anti-spam legislation prevented opt-in mailings.
I suppose we can see the weekly missives on your web site?
So sad to hear about this. Not surprising that regulation of trade means the suppression of trade, however -- a mordida disguised as a tax in the public interest from which only a few public servants benefit in terms of greatly expanded employment opportunities ...
On your minimizing regret slide you have seven different "choices" of investments over 10 years. I would like to see a total return at the end of the ten years for each of the "choices". How much more return over the balanced fund would each get compared to the volatility experienced.
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
Norbert Schlenker wrote:Log scales on most of the y axes.
I like the sentiment, I fear that log graphs won't be understandable to a general audience. I've been chastised in other venues about using "complicated" concepts like standard deviation. Sigh.
On your minimizing regret slide you have seven different "choices" of investments over 10 years. I would like to see a total return at the end of the ten years for each of the "choices". How much more return over the balanced fund would each get compared to the volatility experienced.
It's counter to the point to the slide. The idea being to compare the experience of two investors. The first holds the balanced fund. The second holds the individual components of the balanced fund.
A similar point could be made by comparing an investor who holds fund x to one who holds all of the stocks fund x holds.