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kcchongnz's comment on “The best run companies do not pay a single dividend”
kcchongnz “The best run companies do not pay a single dividend”
I have doubt on the above statement unless you can show an academic research showing the statistical significance of your statement, some kind of research showing economic value added or market value added or something, more than those dividend paying companies, and not just cite one or two examples such as Apple in its old days, or Berkshire Hathaway. Otherwise intuitively I guess of otherwise.
John Burr Williams, in his The Theory of Investment Value mentioned that the intrinsic value of a company was equal to the present value of its future dividends discounted by an appropriate rate.
The US equity market provided a compounded annual total return of 10.4% from 1900 to 2000, 5.0% in dividend yield, and 4.8% from earnings growth and just 0.6% due to change in the PE ratio (John Bogle of Vanguard). One can see that dividend yield made up the highest portion in the total return.
Hence the best run company in my mind, must be one which is able to earn a high return on its capital (ROC) consistently. This provides economic value added to shareholders. Part of the return can be distributed to shareholders, and part of it used to reinvest and earn a marginal ROC higher than its cost, and more dividend distributed to shareholders subsequently.
Take one example in Bursa. If you have bought Pintaras Jaya shares 5 or 6 years ago, you would have recouped all your capitals, just by receiving the dividends.
Many corporate managers when saw so much cash in the company, simply went on acquisition sprees on businesses outside their expertise, or spend lavishly or misappropriate all the cash. As a result, acquisition earned return way below the costs, or even losses, and result in huge shareholder value destroying, and money disappeared mysteriously.
Hence it is not a matter if a company pays dividend or not, rather clever capital allocation by the managers.
I have doubt on the above statement unless you can show an academic research showing the statistical significance of your statement, some kind of research showing economic value added or market value added or something, more than those dividend paying companies, and not just cite one or two examples such as Apple in its old days, or Berkshire Hathaway. Otherwise intuitively I guess of otherwise.
John Burr Williams, in his The Theory of Investment Value mentioned that the intrinsic value of a company was equal to the present value of its future dividends discounted by an appropriate rate.
The US equity market provided a compounded annual total return of 10.4% from 1900 to 2000, 5.0% in dividend yield, and 4.8% from earnings growth and just 0.6% due to change in the PE ratio (John Bogle of Vanguard). One can see that dividend yield made up the highest portion in the total return.
Hence the best run company in my mind, must be one which is able to earn a high return on its capital (ROC) consistently. This provides economic value added to shareholders. Part of the return can be distributed to shareholders, and part of it used to reinvest and earn a marginal ROC higher than its cost, and more dividend distributed to shareholders subsequently.
Take one example in Bursa. If you have bought Pintaras Jaya shares 5 or 6 years ago, you would have recouped all your capitals, just by receiving the dividends.
Many corporate managers when saw so much cash in the company, simply went on acquisition sprees on businesses outside their expertise, or spend lavishly or misappropriate all the cash. As a result, acquisition earned return way below the costs, or even losses, and result in huge shareholder value destroying, and money disappeared mysteriously.
Hence it is not a matter if a company pays dividend or not, rather clever capital allocation by the managers.
21/06/2015 15:24
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Posted by Why_leh > Jun 22, 2015 11:09 AM | Report Abuse
Why out of money warrants MRCB-W(14.5sen, 100% premium) & BIMB-W(34.5sen, 25% premium) should worth more than dividend paying Xinghe(7sen)?
The value of warrant is not just made up of its intrinsic value. it has a time value. The time value can be very large depending on the volatility of the underlying stock, the time to maturity, gearing etc. You need to have some knowledge of how the value of a warrant is derived.
But nobody says it is worth more than your Xinghe. There are many factors, and uncertainties.
2015-06-22 11:14
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Why out of money warrants MRCB-W(14.5sen, 100% premium) & BIMB-W(34.5sen, 25% premium) should worth more than dividend paying Xinghe(7sen)?
2015-06-22 11:09