Do you agree with Anthony Bolton?

StevieJ

rl290 wrote: »

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

I am fully aware of how companies buy back programmes work, in fact I have often complained that companies should be making their buy-back when the share price is low i.e. now.
This thread related to dividend yields not total shareholder returns, Anthony Bolton referred to dividend yields as did yourself.
If companies like Shell raise the dividends in line with inflation and virtually guarantee not to cut the dividend, returns based on recent share prices can be mesmerising. During the recent volatility the Shell share price hit the mid 12.30's giving a yield of close to 8% tax free.

Stavros_3

There are so many different oppinions in the financial world as to when !!!! to invest. I am looking at long term growth of a very sizeable sum for 5 - 10 yrs as apposed to short term gains.

sabretoothtigger

HBOS did share buy backs and now they are issuing more shares then have ever been in existence, they got it the wrong way round

The market has a buy me sign hanging around its neck.

Agreed but the trend is down, whose got the guts to buy into a falling market. There not the funds available to support all the bargain opportunitys out there though I did read american taxpayer money has been used for a private buyout

StevieJ

sabretoothtigger wrote: »

HBOS did share buy backs and now they are issuing more shares then have ever been in existence, they got it the wrong way round



Agreed but the trend is down, whose got the guts to buy into a falling market. There not the funds available to support all the bargain opportunitys out there though I did read american taxpayer money has been used for a private buyout

Depends if you think history is likely to repeat, in the 90's recession the market bottom was put in End Sept 1990, the economy first went negative Q3 1990 (-1.2%).

purch

This article is dated 20 September

The FTSE 100 closed at 5311 on Friday 19th September 2008

Looks to me like Bolton is old and past it if he thought it was a buy at that level !!!!

1echidna

I fear that we are still in a worldwide economic maelstrom which is decimating the value of company assets and their earning power. It may well be that even allowing for the fall from when Bolton made his pronouncement there are still virtually no undervalued shares. Most of my holdings are in cash but I have some equity based investments which I am only hanging on to as a hedge in case I am wrong. I fear though that this is a totally different kind of storm than we have seen for many decades.

Stavros_3

So back to my original question, is this the time to invest .....or wait a few months?

amcluesent

'Buy on the dips' has been a workable approach for years. BUT look at the prices from 1929, at every rally another wave of investors decided this was the turning point, invested and were bankrupted.

IMHO, we're a long way off the bottom this time, and not seen the final capitulation. Too many peeps reckon they're being 'smart' to buy-in now...well, we'll see.

IMHO when utter fools like Clown and his sock-puppet Darling are going around smugly saying that True Labour not NuLabour have sorted this one out, that tells me something. "Experience" of running the school tuck-shop isn't going to help when multi-trillion $$ losses are appearing globally.

1echidna

amcluesent wrote: »

'Buy on the dips' has been a workable approach for years. BUT look at the prices from 1929, at every rally another wave of investors decided this was the turning point, invested and were bankrupted.

IMHO, we're a long way off the bottom this time, and not seen the final capitulation. Too many peeps reckon they're being 'smart' to buy-in now...well, we'll see.

IMHO when utter fools like Clown and his sock-puppet Darling are going around smugly saying that True Labour not NuLabour have sorted this one out, that tells me something.

Right and if Darling increases borrowing to spend, on the assumption that this is just a minor dip which he can somehow kick start us out of, debt levels a year or so down the line may be quite unsustainable for UK plc - another Iceland?

sabretoothtigger

Iceland's (corporate?) debt was 60bn on a gdp of 20bn or 300%. The info in my sig is USA and read pestons blog for uk figures

http://www.bbc.co.uk/blogs/thereporters/robertpeston/

As I've pointed out in a tediously repetitive way, the sum of all we've borrowed - the aggregate of corporate, personal and public sector debt - is equivalent to three times our annual economic output.

300%