Colin Reed

Colin Reed
Contributor since: 2012
Thanks. ICBC is the world's biggest bank, but is largely unknown to US investors. I managed to buy it at 5.01 HKD since writing the article, so I am sitting on an 8% gain based Friday's close.
Thanks for your comments Robert. My reference to 'conventional wisdom' was not to SA. Wisdom on SA is anything but conventional. It refers more to the articles that I see in the mainstream financial press.
The purpose was not to debase the value of growth. If your income is not going to grow via an increasing dividend, your income might as well be uhmmm..Fixed. The article was trying to say start right and you have a better chance of ending right. Start low and you spend a lot of time catching up. This of course is not an argument for picking outliers where the market is pricing in a dividend cut either. I was trying to point out that by giving in to a home bias US, investors are giving themselves an unnecessary handicap. The S&P 500 has a p/o ratio of 28%. Australia has a p/o ratio of 65%. Without assuming a lot of risk I can increase my yield substantially - just by shopping for it elsewhere. Of course price points, p/e,growth etc matter the same regardless.
That structured, disciplined approach will serve you well . If it is applied consistently. I also own COP (bought around the 2008/2009 lows) yoc is decent - currently 5.23% CAGR is also decent, so I have kept it. It is the only US stock I own. Am finding div growth + higher current yields elsewhere.
Point well made Dave. Ideally you want you start point > 5 % For me the Div Arist def for inclusion is both rigid and misleading. I don't need increases every year, but 5-10 year periods I need to see the p/o increasing by a substantial margin over the inflation rate. I find many UK/Australian stocks manage to deliver just that.
Thanks for your kind words SDS. I don't have any problem with companies managing their div policy. Every company does does and should. It is how it is done. Increasing the p/o while eps is stagnant is managing, but really is mismanagement. Paying out < 15% of earnings and increasing the div by the inflation rate each year so as to remain in the div aristocrats is also managing. I would call it manipulation.
Interesting comment Charles. I am not sure I fully understand. Could you enlarge?
Appreciate all your comments. I am in Europe atm, where it is late writing this. Will respond tomorrow....
Very useful article Steven. Not sure the 30% number is correct for US.
Have never seen anything higher than 15%
Thanks Patrick. I agree. The comments always inform more about the subject than the article alone.
There is 0% tax withholding on dividends paid out by UK companies to US investors.
Your UK shares are likely to be held within CREST, the Central Securities Depository for the U.K, (equivalent of the
DTC in the US). The only revenue they would collect/withhold for the UK tax authorities is stamp duty, which is 0.5% of the value of any share buy order.
There is always exchange rate risk. It also hits multinationals who report in USD. I would argue that their currency reflects more the strength in the Australian economy, with interest rates being more of a blunt tool for central banks to ease/constrict the money supply.
Australia's geographic location is a secondary factor in the demand equation, otherwise China's location would also be a restrictive factor for their export economy. But you're right there is real downside risk from here with AUD. I tend to spread my income flows across UK, EUR, CAD, HK, BRA. I would gladly invest more at home, but US payout ratios/yields are so lousy, I hold little US paper, apart from what I picked up during the 2008/09, where yoc is now > 5.0%
Depending on your broker, you should be able to get it through them. If they are big like JPM or BAC, they will also have a custodian dept and your brokerage should be able to source it internally from them. The net has bits and pieces, but it is often unreliable or out of date.
Thanks for your comments Eric. No doubt Oz has got bubble trouble with real estate, particularly in the larger cities like Sydney. But so does Canada in Toronto and Vancouver. The similarities between the two economies are many, but Australia is less dependent on China than most people think. < 25% of their total exports go to China. Canada exports > 80% of their output to the US. Both countries are characterized by a highly regulated bank sector with conservative lending practices. Even if the housing market comes off, their financial structure will not implode. You're right though they're the top of the league right now because of housing. But the long term performance of their equity market is not a fad - that was the main thrust of the article.
Thanks surgeezer. Look forward to checking the holdings of CEF.
I sit with Corporate Actions (CA) at a large Financial institution. With optional CA's (like rights issues), it is usually restrictions from regulatory bodies in the shareholders domicile that prevents the custodian bank from offering the option. The US (SEC) is extremely restrictive in this regard.
Japan, Canada are quite strict, but the US is extreme.
That I didn't know about. Thanks for the info Brad.
You own REIT's for the income right? The second highest yield on the list Universal Health Realty Income Trust has a Payout Ratio = 39.51 and CY of 5.08% Just by moving outside of the US, e.g. Australia, UK, or Europe, I can access markets where the average payout of ALL stocks > 50%. US Management doesn't distribute enough of its earning to stockholders. The average payout ratio of S&P 500 is currently < 30% If you want high quality income streams look outside the US.
Thanks sevenker. Apologies for not responding sooner. Been diverted with other projects, so have neglected SA. Am actually in the process of writing an article about dividends and the structure of Oz market vs US.
Individually, there is not really a bear case. HFD have grown their eps each year for past 5. Av EPS growth = 11.25% over that period. Impressive considering the brutal UK retail environment. Debt/Equity ratio = 50:50. P/O ratio is moderate at 60%
They are just caught up in the negative market sentiment surrounding UK retailers. But IMO they are the sweet spot - esp with CY = 8% TTM
Not really. That is not one of the variables I look at in evaluating buy candidates.
Well written article, that put the pieces of the puzzle together for me. I think that if the market is not recognizing the dividend yield, they will cut as TEF did. Here, I think the market would sigh relief, stop holding its breath and actually bid the stock up.
Couple of things: In your risk indicators table the ratings value for STD Spain is N/A, but later on in the article you state
'It also has a credible Standard and Poor's credit rating of A+'. Please explain.
Also, there may be double taxation agreement between UK/Spain which gives an effective w/holding rate of 21%, but the standard w/holding rate for Spanish div = 19%
No, it is when quality stocks perform in this fashion that I become interested. I know the risk of ownership at this stage is low. Risk is often defined by the price at which an asset is acquired, not the underlying asset itself. I see little to indicate that HFD's earning's are deteriorating. Technically, the UK entered recession this week, but I think there are indications that the UK economy is recovering, so, I am not worried.
Well well well....AZN down 6.3% in Lon trading today on the back of a profits warning. Looks like the tech breakdown is happening.
Your current yield (TTM) is now over 8%. Look at 5yr EPS and div growth. Don't worry about the chart. You are being paid handsomely while the stock price recovers.
You flip the coin for a binary result. The outcome is purely random. Only the flipper influences the outcome. Market prices are created by the buying/selling of thousands of humans. Even tho prices maybe algorithmic in execution, the origin of the logic is human - and the profit motive is always the same. Price patterns don't always repeat themselves, but they do with enough regularity to have value. Every economic theory (technical or otherwise) can be dismissed in terms of randomness and luck. Do you think WB, Charlie Munger or Walter Schloss were 'lucky' for 50+ years? It will be interesting to see if the 2800p level holds with the Q1 Earn April/26
Housing is not going to rebound strongly. The longer and more extreme the inebriation, the longer the hangover. What housing is about now is risk. Ownership is considered risky. Renting safe. Markets are always safest when they look at their most risky and vice versa. Your downside risk is limited from here. The economy is recovering, and housing will too, along with real consumer confidence and falling unemployment. But any rebound will be muted as credit will be given (thankfully) cautiously. We will not see a real estate binge like that for another 15-20 years. In the meantime property ownership for a lot of people shut out 2003-2008 is suddenly affordable. Hope they have the wisdom and foresight to take advantage of it.
Thanks for posting Colin. From your response:
'BP will still have to prove gross negligence on the part of Transocean if they expect Transocean to pay a share of the fines.'
Not as I understand it.
Yes, U.S. District Judge Carl Barbier has ruled that BP has to indemnify the HAL/RIG for third-party compensatory claims. At the time of ruling the judge also stated that the HAL' contract's protection could be voided by fraud(highly unlikely IMO). No, What I am referring to are punitive damages as well as civil fines
under the Clean Water Act, which Barbier made clear HAL/RIG could still be on the hook for. Here, the burden of proof will not be on BP to prove negligence on behalf of HAL/RIG.

HAL/RIG are also trying to dismiss two states’ economic damage claims. Both companies seek dismissal of claims from Alabama and Louisiana in pleading 'Bundle C', which covers claims for economic damages filed by governmental entities. If the claims are not dropped, HAL/RIG have gone on record stating they should not be held liable anyway, because they are not considered “responsible parties” under the Oil Pollution Act.
BP/HAL/RIG are in web of suing and countersuing that I don't really have my arms round completeley. Like I state in the article it is one of the largest and most complex legal cases in recent history.There is no doubt in my mind though that BP will find it impossible to prove either HAL/RIG negligent. RIG have still set aside $1b for eventual claims with Deepwater. HAL are only insured for $600m, but have not set aside further reserves. An analyst at Simmons & Company International,Bill Herbert, who follows Halliburton believes HAL will be forced to make some kind of settlement."Halliburton's management has been consistently optimistic that as far as its participation, it would settle," "It is our view that it is going to write a check,"
There is no doubt that BP tried to cut corners as you have itemized above. The big question is will it go to trial or will they settle (as they did with PTC), and if if does, can they gross negligence?
The recovery in BP's stock has two drivers. Worst case scenarios at least now have a price ticket, and rising crude prices contributing to BP's robustness to future claims.
Thanks for your feedback Schmiddy.
I think TA does work, but not all the time. It doesn't need to work all the time to have validity. Out of x nr of price patterns that occur, we have no way of knowing in advance which one's in the series will be predictive, and which ones will fail. Analysis, technical or otherwise is opinion based on interpretation. Differences of opinion are what makes the market.
For an example of a descending triangle pattern that did 'work' check out my article:
The outcry would have been equal. The actual penalties would have been less. For two reasons:
1: US still has significant political clout/influence
2: Significant differences in legal recourse. Any punitive damages awarded would be much less.
LGCY has a payout ratio of 130%.
3yr EPS is -31%
The yield while high, I would question is it sustainable? Also stability in earnings is a worry.
PTNR offers a 15% yield, with a 70% payout and smoother EPS curve.
I am not trying to be cynical, just want to understand your logic
Researching/writing these articles for SA forces me to be objective and see both sides. I understand what I own, and what I think I would like to own much better as a result. Thanks to everybody who has posted - and the positive feedback. Really encouraging.
Thanks April May. The SPDR MSCI Australia Select High Dividend Yield Fund ETF trades on the ASX (Aus.Exchange). Ticker: SYI. Approx 40% of fund comprises of the big 4 banks. There is a US ETF -
MSCI Australia Index Fund - Ticker: EWA, that trades on Arca, but has a much lower concentration of its holdings in the the big 4.