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Yield on Cost
#11
(10-08-2013, 10:14 PM)Kerim Wrote: But if I understand what you are saying here, cannew, you are not really talking about yield on cost, as typically defined (current dividend divided by purchase price). It is unclear to me from your posts if you are including in your assessment capital gains, but assuming so, then I think you are really talking about a variant of total return, which I suspect most here would agree is a very useful metric. You just happen to label it something close to "yield on cost."

Maybe I should have called the post Yield on Investment. I track the Income my investments return me, based on my total investment in the stock. That includes initial purchases, dividend re-investment and new purchases. I do not worry about capital gains, any discount for inflation or current market value.

The reason I invest is to get a stream of growing income, not to watch the current value of the investment. Almost every person here has suggested they are looking for an entry point to buy, which means they hope the market goes down (and so would the value of their holdings), so who cares what the market value is as we are all waiting for the price of our stocks to go down.
Just a side note: I use my Average Cost as a guide when to buy more shares of the stocks I own. Assuming the company is still on my list.

(10-09-2013, 07:53 AM)hendi_alex Wrote: A person could hold an under performing dog for ten years and then pat themselves on the back because YOC is 8% or 9%, but with that YOC of 9%, the purchasing power could have been cut in half over the period. Also as others pointed out, the market yield may be 2% and in the current market where there happens to be very attractive alternatives. The person who is living too much in the glow of YOC may never even consider swapping the position out for a replacement that has much more solid forward prospects.
If that under performing dog (with an 8% or 9% yield on my YOC) is continuing to increase the dividend, at a rate faster than inflation, than yes I will gladly continue to hold it. Go back and look a WMT since 1997.
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#12
If you go back that far, when WMT was still a significant growth story, the picture looks pretty good, as a total return play, though the dividend has never amounted to much. If you look at WMT over the past ten years, IMO it has been pretty much dead money, yielding a paltry 1% ten years ago and still a paltry under 3% now. Even calculating the very misleading YOC, the yield is still just modest for the person who bought at between $50 and $60 ten years ago. With the share price at its current lofty levels, even the ten year total return looks pretty good. I'm not saying that WMT wasn't a decent investment over the past ten years, but as a pure income play, it has nothing that attracted me then and has even less to offer me now.
Alex
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#13
(10-09-2013, 07:53 AM)hendi_alex Wrote: I also have an issue with dividend reinvestment, unless the shares are bought at a significant discount. It makes no sense to me for a person to opt for dividend reinvestment because those accumulations would rarely come on a day that, if holding investment cash, you would have decided to buy shares of that particular company. So if you would not put fresh cash into shares on that day, why have buy them with dividend cash. IMO it is much better to let the dividends accumulate, and then make a well considered investment with the money. If the reinvestment shares come at a 5% discount, then perhaps that would tip the scale toward direct investing with the dividends.
I've always felt DRIP's are great ways to get into stocks with minimum $$$ and the best way to get those $$$ to grow. I've started DRIP's for both grand kids with $500 investments periodically and allowed the dividends to re-invest. The dividends were small and it's been a learning experience for them watching the dividends and the # shares they own increase each Qtr.
Date Price Shares Value
Jan 31\08 46.6433 1.097264 51.18
Apr 28\08 47.6032 1.086061 51.70
Aug 08\08 48.8784 1.11358 54.43
Oct 29\08 38.2847 1.56694 59.99
Jan 28\09 28.0010 2.169249 60.74
Apr 29\09 33.7020 1.834313 61.82
Jul 29\09 43.7082 1.434971 62.72
Oct 28\09 45.1326 1.518415 68.53
Jan 28\10 44.2749 1.564543 69.27
Apr 29\10 50.8979 1.376088 70.04
Jul 29\10 49.4341 1.430389 70.71
Oct 28\10 53.8035 1.327237 71.41
Jan 28\11 54.7456 1.31627 72.06
Apr 29\11 56.1279 1.374717 77.16
Jul 29\11 55.6586 1.562202 86.95
Oct 28\11 50.6590 1.732565 87.77
Jan 28\12 52.5558 1.687159 88.67
Apr 29\12 53.4202 1.772925 94.71
Jul 29\12 50.1254 1.908813 95.68
Oct 28\12 52.6484 1.904141 100.25
Jan 28\13 57.3974 1.765585 101.34
Apr 29\13 55.6542 1.935703 107.73
Jul 29\13 57.2791 1.901042 108.89

DRIP's are invest, add more periodically & forget.

(10-09-2013, 01:46 PM)hendi_alex Wrote: If you go back that far, when WMT was still a significant growth story, the picture looks pretty good, as a total return play, though the dividend has never amounted to much. If you look at WMT over the past ten years, IMO it has been pretty much dead money, yielding a paltry 1% ten years ago and still a paltry under 3% now. Even calculating the very misleading YOC, the yield is still just modest for the person who bought at between $50 and $60 ten years ago. With the share price at its current lofty levels, even the ten year total return looks pretty good. I'm not saying that WMT wasn't a decent investment over the past ten years, but as a pure income play, it has nothing that attracted me then and has even less to offer me now.

You're right, from 2000 to 2011 there was hardly any growth in price, dead money, but look a the div growth:
WMT Div Div Gwth
1998 0.14
1999 0.16 14.29%
2000 0.20 25.00%
2001 0.24 20.00%
2002 0.28 16.67%
2003 0.30 7.14%
2004 0.36 20.00%
2005 0.52 44.44%
2006 0.60 15.38%
2007 0.67 11.67%
2008 0.95 41.79%
2009 1.09 14.74%
2010 1.21 11.01%
2011 1.46 20.66%
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#14
Dividend growth is great, but when you start almost from nothing, it is still a very modest yield after all of these years. And we are now talking about a mature business that operates on thin margins, as has so very many barbarians knocking at the door. Not where I would want my money today. But that is what makes a market, and I am sure that many long term WMT holders would agree with you. Good luck as we muddle through this very murky future.
Alex
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#15
Chuck Carnevale had an excellent article on Seeking Alpha today discussing Yield on Cost and giving an example from his consulting experience showing how the metric can be used in planning for retirement.
My website: DGI For The DIY
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