Forum Archive Index - August 2000

["Graeme Christie" <bayvu@ihug.co.nz>]

As another ex-dairy farmer I've got to agree with you John. Leaving 'dividends' with the co.( they called it reserves) was pretty unrewarding. We never saw little of them again even in years of poor payout. I don't think this argument about 'divs or not' is anything at all to do with propensity to risk. I trade cos that don't pay a div. (ADV etc) and usually hold long-term cos that pay a reasonable dividend (PFI) etc. Interesting that one of PFI's directors, Gareth Morgan, seems to favour companies not paying a div. on the basis that they should be using the money for growth. Figure that one out! I agree flavour of the month is a pretty compelling reason for shareprice fluctuation, as we see every time company results come out. Everyone can think of examples, but a classic is PRG - I think their profit increased over 1000% last result but check their current popularity! I wonder whether there's any merit at all in comparing our reasons/methods of investing with the USA or anyone else. Personally we're doing fine on our divs. Cheers.

----- Original Message -----

From: John and Beth Schwartfeger

To: sharechat@sharechat.co.nz

Sent: Thursday, August 03, 2000 3:49 PM

Subject: Re: [sharechat] Big picture issues

Brian,

Interesting thoughts but it raises the question. Who is better at managing your money? You or the company? Surely you have a right to take your share of profits from a company you own and invest them as you think fit. The results of that would mean you are ultimately esponsible then for your own destiny as it was you who made the investment decisions.

Being an ex dairy farmer where it is rife that the companies believe they can use your money better than you can yourself they were for ever with holding money from payout to invest in factories and other companies on your behalf under the pretext it would benefit your payout further down the track. Unfortunately payout went backwards for many years and the guess for 10 years time is payout will still be at its current levels. To me in that case I would be better off having my share of the profit to try and invest and see if I myself couldn't get a greater return.

The logic that by maintaining money within the company and expanding or reinvesting as they want just doesn't seem to be the case. Not being the brightest in this chat site at company and share business I wouldn't start to try and teach anyone in here but my initial assessment indicates that share price has more to do with fashion at times than anything else. Restaurant Brands for example reported they had their 6th quarter profit in a row (I think thats what it said:))yet their share price languishes. Is it because of a dividend payment or is it because they are out of fashion? This could be argued with many companies and really is a chicken and egg argument..  Just like the question about the American share market and its dividend / share price comparison. Another chicken and egg argument.

I could be wrong in my line of thought but personally I vote for high dividend payment so I can control my own investments but not at the cost of inhibiting the company. Give a company more money to spend and they pay higher directors fees, more flasher company cars and so many other wasteful non profit making expenses.

Just my thoughts.

Cheers..  John Schwartfeger