Do you agree with Anthony Bolton?

Stavros_3

Have a read of the article, what do you think

http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=452383&in_page_id=3

amcluesent

WAY too soon to be go long IMHO, we've only started to see the collapse of the hedge funds and the inevitable fire-sales of any assets. Business' are staggering on using cash in hand hoping bank lending will resume, people are still clinging onto CDOs are worth something, the East European countries are collapsing like Iceland and the splits in the Euro zone are widening.

FTSE at 3000 soon enough.

StevieJ

In March 2003, the dividend yield also rose above the bank base rate so with rates at 5% we are not quite there yet.'

The Ftse dividend yield is currently 5.8% base rate is 4.5%.
If you adust the yield to account for the banks not paying dividends, say 20%
this would still leave a yield of 4.6% (still above base rate).
The market has a buy me sign hanging around its neck.

rl290

I am of the belief that dividends could completely dive - banks bailed out by the BoE may stop altogether, miners will suffer from lower demand, retailers will see less people buying on credit, etc etc.... I'm staying out of all long-only equity investments/funds, except for Japan at the moment.

R

StevieJ

rl290 wrote: »

I am of the belief that dividends could completely dive - banks bailed out by the BoE may stop altogether, miners will suffer from lower demand, retailers will see less people buying on credit, etc etc.... I'm staying out of all long-only equity investments/funds, except for Japan at the moment.

R

Companies only cut dividends as a last resort, for example Shell have never cut their dividend (as far as I aware) even when oil prices were $8.
The miners are cash rich at the moment, I am sure they can see out the next 12 months before normal service is resumed.The banks will cut dividends in the short term but I made allowance for this in my calculation above.
As for the retailers they will have tough time short term but with falling interest rates I can see them recovering in the medium term.

LongTermLurker

He says: 'When the bounce did come in 1975, the market virtually doubled in a few months. I think we could be in the last phase of this bear market. My advice is to stay fully invested and reinvest your dividends.'

I certainly hope he's right. I haven't added to my investments this year other than a small amount used to top up some direct-held funds to the ISA limit and I've stayed "brave" throughout but a recent view of one of my pensions having dropped 51% :eek: rocked me a bit (as a whole my pensions haven't done quite so bad but this one was a bit "unbalanced").

I don't have anything with Bolton, but I think whatever happens, the only thing you can do is put on a brave face and if you're invested in popular funds, hope they remain the popular funds when sense returns to the markets. Like celebrity chefs, people will likely follow the star players up and the increased popularity should see those funds increase in price.

ad44downey

StevieJ wrote: »

Companies only cut dividends as a last resort, .

If the current global economic meltdown doesn't constitute a last resort then I don't know what does

StevieJ

ad44downey wrote: »

If the current global economic meltdown doesn't constitute a last resort then I don't know what does

Sorry I forgot the end of the world is nigh, I will keep an eye out for those four Horsemen.

edda

Stavros wrote: »

Have a read of the article, what do you think

http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=452383&in_page_id=3

This article is dated 20 September. If a week is a long time in politics, what is a day worth in these financial markets?

rl290

StevieJ wrote: »

Companies only cut dividends as a last resort, for example Shell have never cut their dividend (as far as I aware) even when oil prices were $8.
The miners are cash rich at the moment, I am sure they can see out the next 12 months before normal service is resumed.The banks will cut dividends in the short term but I made allowance for this in my calculation above.
As for the retailers they will have tough time short term but with falling interest rates I can see them recovering in the medium term.

Without wanting to get too technical*, companies such as Shell return money to shareholders in two ways: dividends and share buy-backs. Psychologically, companies never like cutting dividends.

So, what you see companies like Shell doing is following a rigid policy of increasing dividends by a fixed amount every year, and using any excess that they wish to return to shareholders to buy back shares (Shell launched a $5bn buy-back in 2005). These buy-backs make big differences to long term shareholder returns.

When I talk about dividends, I was using my language quite loosely - I mean all capital return, including buy-backs. Now, if you look at large companies TOTAL capital returns to shareholders (dividends+share buy backs), you will see that they can move massively - both upwards and downwards! Shell may keep their dividend constant over coming years, but they will surely cut their share buy-backs, which will have a huge effect on your total shareholder returns over the long term.

R


* To understand all this fully, I would recommend reading a good textbook on corporate finance. I would suggest, Principles of Corporate Finance by Brealey and Myers

rl290

Take a look at how dividend amounts have gone up steadily, whereas buy-backs have moved around a fair bit - I expect them to collapse. http://therealreturns.blogspot.com/2006/03/share-buybacks-plus-dividends.html
Shame it doesn't go up to the present....