Teller wrote:Of course market will be attractive but not at the moment.not in this year. Most of the shares are reaching 52 week low prices.it's better to keep attention buy in lowest for a period of one year. More chances to collect good shares in coming days. Do the home work to identify total return is more than 10% or higher.find out the companies which give regular dividends.when TJL trades at 7.00 ,there dividend percentage from the market price is 28%.when CTC trades 500.00 their percentage is 9 (45/500)*% , consider more in dividends. Agree that paying more dividends like sucking the blood. But if company doesn't have more reinvestments for what internal financing.we have to take the profit out for time to time.it's just like a liquidity of your investment. We want a cash generated business, people think that invest on shares like investment on lands.some times lands give additional income rather than capital gain .suppose if you buy a coconut land you will get coconuts.you can sell those regulary and earn cash than getting total land sale. Share is a part ownership of a company. We expect profit as investors without exchanging the ownership. So you will get attractive gains by investing with high dividend payout companies.
Teller, Re Dividends -
1. Firstly, i think you may be dreaming if you think you can buy CTC @ Rs 500 or TJL @ Rs 7.
even if TJL were to be at Rs 7/- the Dividend Payout would have to be Rs 2.50 for you to have a dividend yield of 28 %. do you honestly believe they can pay such a dividend (when their FY 2013 EPS is Rs 1.55) and even if so, will you be able to get the share at Rs 7 ?
2. Foreign Funds come to Frontier Markets like Sri-Lanka and like to invest in Multinational Companies like NEST, CTC, LLUB amd other Blue Chips Like JKH etc not for the Dividends. They come as a Portfolio diversification / allocation strategy looking for Capital Gains, paying the premiums for illiquidity etc, due to the favourable Risk / Reward trade offs. just look at Janus. they bought JKH @ 160 some time back. They didnt buy expecting a Rs 3 Dividend. For a Foreign Fund, the exchange rate risk they take due to a Rupee devaluation means they need to look beyond dividend yields.
3. Even for a local Investor, the Dividends yields are very unattractive when you consider Inflation and the Price Premium for Asset Value. Why should i pay 3,4, 10, 20 ,30 times book value to get a dividend yield which is way below the Inflation rate. It is the same as buying a 1 million (face value) FD paying 30 % interest for 10 Million to get a 3 % dividend yield when inflation is much higher. unless Of course you buy a share like JINS, decent Dividend Yield, Price close to BV and low p/e. but this is rare. you have to look for similiar stocks and not expect shares like TJL & CTC to half in value and become attractive dividend yielders as it simply wont happen for that exact reason. (i.e. everybody will demand it for yield especially if interest rates are low).
4. Company Dividend Policy - varies from company to company. Just because a company pays out 90-95 % of their profits as dividends may not necessarily be a good thing.They may not need the cash for capex, expansion or growth. maybe they are in mature industries. and just bcos they pay 90-95 % of their profits, the share price may be high and thus the actual dividend yield low. Other companies that do not pay good dividends maybe re-investing their internally generated cash aggresively and growing their business, revenues and assets. The dividends foregone today may lead to capital gains in the future. there maybe some companies stuck in the muddle of both above strategies. bottom line, looking for dividends in a high inflation frontier stock market may not make very much sense especially for retail investors & traders. sometimes you will also observe how ex dividend, stocks adjust downward more than the actual dividend paid like for eg Sampath.