Forum Archive Index - February 2004

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Stephen,
 

> 
>> In New Zealand, and to a large extent Australia as well, we are
>> blessed with having a large number of high yielding investments to
>> choose from.    
> 
>By "yield" you mean "dividend yield", yes?
>

Yes

> 
>>With this kind of investment, forecasting growth in future years is
>>less important than short term forecasting the sustainability of the
>>current position.  
> 
>Could you clarify what you mean by "sustainability of the current
>position"? Do you mean "ability to maintain current earnings and
>dividends".
> 

Not exactly.

I mean the ability to maintain the current dividend *yield*, or in the rare 
case where the dividend yield is greater than the earnings yield, the 
ability to retain the current earnings yield.

Example.    WRI has a gross dividend yield of 12.5%, based on a 
dividend rate of 11.5cps and a share price of $1.40.    There is a drop 
in earnings and dividend announced, with the annual dividend forecast 
to drop to 8.5c.   At the same time the share price suddenly drops to 
$1.20.   That means a gross dividend return of 10.7%.    That is still a 
good return, and hardly cause for selling the share if income is what 
you want off it.

SNOOPY

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