Originally posted by smartcat
Originally posted by Vivek Sukhani
I believe its more to do with the opportunity factor. I generally enter and exit to improve my yield. When I entered Chambal @ 32 it was paying me more than 5 p.c. Now when I sold it at 84 and invested it into a Century Enka, I jacked up my yield to nearly 10 p.c.. The reasoning for this plan is as thus:
Suppose, I bought 1000 tickets chambal @ 32
Cost=32000
Dividend=1.8*1000=Rs. 1800
Now proceeds from selling this at 84=84*1000=Rs. 84000
No. of Century Enka bought=Rs 84000/160=525 shares.
Dividend recievable=Rs.6*525=Rs.3150
Now, my yield has actually moved up from 1800/32000 to 3150/32000.
I generally try to make my yield cross above 15 p.c. in a 2 years' timeframe. I have played many yield games so have develop a kanck for such things.
I am sure all the members will disagree with me but nonetheless I have spoken about when i plan to enter and exit. |
Vivek, how do you predict the future dividend per share of a stock? By looking at its cash flows, past record etc?
The shift from Chambal to Century Enka seems like a good idea if Century actually gives a dividend of Rs. 6/share instead of Rs. 4 or 5. Also, what if Chambal raises their dividend to Rs. 2.4 per share (just an example)? |
Hi Smartcat,
Predicting dividends is a very difficult task. I have a concept of break-even yield which I use to work out how much a fall in downside in DPS can keep my dividend receivable constant. Its some sort of a scenario analysis which I apply on my portfolio. Most of the times, because I apply so much negative thinking onto my portfolio that the stocks I get into increase the DPS. I have played the yield game so many times in GE shipping, Thirumalai Chemicals, ONGC, Tata Chemicals etc.
There are someimportant points to remember for yield mongers.
1.Never and never expect/hope that the high yielding stock's price go up. If you ask me the question, whether I will like to see century enka @ 200 or @ 150, I will always like it to see it at 150. I will never tire of accumulating stocks like Century enka etc.
2.Be as conservative as possible. Never and never expect the stock you are getting into will jack up dividend. Always have room for positive surprises but provide for all possible shocks. Once I was preparing the questionnaire for dad regarding century Enka and i remember I wrote whether the fixed assets have a exit value as the wdv in the balance sheet. My dad was so angry and he called me the most arrogant man he has ever seen in his life but then I have had a knack of asking extremely horrible questions which can drive people mad.
3. Do smart churning and at right point. I have a thumb rule...I generally do a churn when in the process i increase the dividend by a thousand rupees. I look at it like this...in case I do such a thing for 365 days a year, i can increase my income by 365000 a year. And that too tax free in most of the cases.
4.In order to be sure-footed always consider book-value into account while you do a yield enhancing churn. I didnt say that you should pocket Ultramarine for a chambal although in case that churn would have been done the yield could have been significantly enhaced. try to always jack up the book value of your portfolio whenever you do a churn.
5.Keep in mind the BSE group to which a stock belongs when you do a churn. Dont sell your ONGC for a JK Paper to enhance the yield. But dont be a bit reluctant to dispose of your reliance Energy for an ONGC.
6. Most and most importantly, whenever you play such a game, close your ears and open your eyes. Dont fall for the temptation of trying to make a right exit and forgetting about making the right entry. You will be labelled as a notorious trader/investor, but ignore such trash.
7. Work out your calculations on a neat sheet of paper whenever such a churn is done. Build up scenarios and have a fall-back option. Always be prepared to reverse trades, in case the yield game becomes a bit too much favorable.
Although i am an amateur in this field, yet this is all what i have been doing all this while......
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