Is it best to take profit and re-invest or leave it sitting?

[BIRMANBOY]

Since I am not a math wizard I am having trouble coming to grips with this scenario below. Have 6000 SEK in portfolio with a holding cost of $1.90 and current SP of $5.30. This represents 20,000 in un-realized gains. As a dividend yield it is returning approx. 1700 gross per year. which is close to 15% gross. I cannot figure out what is best from a financial viewpoint. For example if I leave it as is its pretty much a growing gold plated dividend earner but a part of me is saying but if you take the profits out and spread them elsewhere it could compound faster. So if I sell 3800 I get my 20000 current profit out and this leaves me with 2200 shares which will return 630 gross a year which is a reduction from 1700 per year so a loss of 1070. To make up that loss I only need to get something like 5.35 from the 20,000. I'm pretty sure I can get several % points better so on the face of it I think I will be better off. However I don't trust my analysis or math skills to be sure. Any suggestions or formulas that can be applied to test similar situations?

[FIsaver]

Since I am not a math wizard I am having trouble coming to grips with this scenario below. Have 6000 SEK in portfolio with a holding cost of $1.90 and current SP of $5.30. This represents 20,000 in un-realized gains. As a dividend yield it is returning approx. 1700 gross per year. which is close to 15% gross. I cannot figure out what is best from a financial viewpoint. For example if I leave it as is its pretty much a growing gold plated dividend earner but a part of me is saying but if you take the profits out and spread them elsewhere it could compound faster. So if I sell 3800 I get my 20000 current profit out and this leaves me with 2200 shares which will return 630 gross a year which is a reduction from 1700 per year so a loss of 1070. To make up that loss I only need to get something like 5.35 from the 20,000. I'm pretty sure I can get several % points better so on the face of it I think I will be better off. However I don't trust my analysis or math skills to be sure. Any suggestions or formulas that can be applied to test similar situations?

Thats right but you went the long way about calculating your dividend return.



6,000*$5.30 = $31,800
$1,700/$31,800 = 0.053 (x100) = 5.3% return on the current value of the investment

[Snow Leopard]

You seem to have thunk yourself into a corner there !

You can ignore how many you bought an what price and how many you need to sell to have 'free' shares. None of that has absolutely anything to do with it.

It is a straight comparison of current dividend yields (I recommend you look at this site: http://www.dividendyield.co.nz/ for information).

I will use the a definition of the last twelve months paid dividends / current share price for yield.

So SEK is $0.278/$5.30 = 5.25%

& for example

HBL is $0.118/$1.68 = 7.02%

&

FPH is $0.253/$9.65 = 2.62%

So if you sell any amount of SEK and buy HBL your dividend yield goes up.
and if you sell any amount of SEK and buy FPH your dividend yield goes down.

Of course this ignores, expected future capital gains and future dividend amounts, brokerage etc.

Best Wishes
Paper Tiger

[FIsaver]

Dividends is only one part of it however so if you wanted to find your total return on the investment you could also take a look at the capital gains you have made. But you'll need to take into account when you bought the shares.

e.g. if you bought the shares at $1.9 a year ago and they are now worth $5.30 thats a great annual return of 279%pa average. But if you bought them 10 years ago its 27%pa average.

^ so if you have say a 27%pa average + you get a 5.3% div, you might of had a total investment return closer to 32%pa averaged. Check out sharesight.co.nz they can add this all up for you, and it's free for the first 10 investments.

[blackcap]

What PT said. Forget what has happened in the past and what price you bought shares at. That is totally irrelevant. Its what is ahead that counts.

[Snow Leopard]

....e.g. if you bought the shares at $1.9 a year ago and they are now worth $5.30 thats a great annual return of 279%pa average. But if you bought them 10 years ago its 27%pa average....

OK so while we are doing basic maths and stuff.

If you bought them at $1.90 and now they are worth $5.3 then they are worth 2.7895 times what you paid for them (278.95%).

If that is over one year then the [compound] annual return is 178.95%
[ Excel formula =POWER(5.3/1.9,1)-1 ]

If that is over ten years then the [compound] annual return is 10.80%
[ Excel formula = POWER(5.3/1.9,1/10)-1 ]

Adding in the dividend yield complicates things depending upon whether you re-invest said dividends or spend it on sharesight subscriptions.

Best Wishes
Paper Tiger

[FIsaver]

OK so while we are doing basic maths and stuff.

If you bought them at $1.90 and now they are worth $5.3 then they are worth 2.7895 times what you paid for them (278.95%).

If that is over one year then the [compound] annual return is 178.95%
[ Excel formula =POWER(5.3/1.9,1)-1 ]

If that is over ten years then the [compound] annual return is 10.80%
[ Excel formula = POWER(5.3/1.9,1/10)-1 ]

Adding in the dividend yield complicates things depending upon whether you re-invest said dividends or spend it on sharesight subscriptions.

Best Wishes
Paper Tiger

Ah yes! I didn't think about compounded return.

[BIRMANBOY]

Thanks to all for your thoughts..yes its the compounding factor which is hard to understand.. If I take out the 20,000 and can get a better gross than 5.3% on that 20,000 then this surely has to compound faster than the present 1700 annual (actually less because this is before taxes). At the moment the 20,000 isn't compounding but is just growing along with the SP growth. This is just getting cloudy...my brain hurts:confused:

[BIRMANBOY]

So thinking out loud, it really comes down to whether the 20,000 will compound faster if converted to cash and re-invested or is the factor of SP growth greater. And the problem with answering this is its dependant on the future and is unknown. Since I have owned the shares since 2011, they have grown in value from 1.90 to 5.30 in 6 years (forgetting the dividends). SO this is 179% or 29.83% straight line per year. If this continues then it would be hard to beat especially if you add in the dividends but I cant help thinking I am overlooking something or missing something. Sorry if my thinking sounds confused..it is...maybe I am thinking growth and compounding are different things but they aren't really after all are they. Growth may be increased by compounding aspects but if linear growth outgrows compounding growth then its immaterial if its compounded or not.

[Snow Leopard]

https://www.youtube.com/watch?v=lF5lCsCxZjQ

Best Wishes
Paper Tiger

[BIRMANBOY]

You could try google 'translator" if that was a bit much for you LOL.

https://www.youtube.com/watch?v=lF5lCsCxZjQ

Best Wishes
Paper Tiger

[couta1]

Thanks to all for your thoughts..yes its the compounding factor which is hard to understand.. If I take out the 20,000 and can get a better gross than 5.3% on that 20,000 then this surely has to compound faster than the present 1700 annual (actually less because this is before taxes). At the moment the 20,000 isn't compounding but is just growing along with the SP growth. This is just getting cloudy...my brain hurts:confused: Keep it simple BB, sell the lot and take the profits ,then invest in another higher divvy paying company with growth potential.

[BIRMANBOY]

Simple? Surely you jest sir? :p My goal is to search the untrodden paths and less travelled highways to find the "best" options. On the one hand you have the plan you mention and the other is to explore a further possible choice. If you gather these types of performers over the years and keep them in your portfolio you end up with a gradually rising dividend yield .. So for example after 5 years the yield may be 8% on the capital introduced, after 10 years it could be 15% ..after 15 years it could be 25% ..see where I am going here. So at the end of ones investing lifetime. assuming one started early enough and kept adding and re-investing you could end up with a portfolio paying yields of very large size on your original capital infusions. Plus you have in all probability equally large capital gains because of SP rises over the years. What I am trying to digest/understand is whether there is any advantage to be had by taking one road as opposed to another. The problem is of course that it is difficult to quantify and measure comparatively the differing options. If you buy/sell/buy/sell/always trying to re-invest and grow the pot is that method better (read more efficient or effective) than just buy, hold/re-ivest etc. and add more. Its an interesting concept to try and come to terms with in my opinion. However I realize that sometimes KISS is actually a more effective way of managing the situation. Doesn't stop me from being curious about the possible outcomes. Asking questions can be useful since occasionally one may get extra insight that has been previously missed.
Keep it simple BB, sell the lot and take the profits ,then invest in another higher divvy paying company with growth potential.

[Joshuatree]

Where do you believe SEK is going BB?. Ive just had a quick look at the 5 year chart; diagonal from bottom to top,WHAT A BEAUTY!!:t_up:. If you believe that its going to keep growing like that(other than a little hiccup atm with fruit rubbing up against each other in this storm) well why look around ;its not greener over the fence(but may be yellow thats where the money is:). Craigs have no research on it; not many do; ask for opinions on here and dig around until you are fairly confident where SEK is going. Certainly in a great sector and a sweet spot in the cycle atm , like SCL.

[iceman]

Where do you believe SEK is going BB?. Ive just had a quick look at the 5 year chart; diagonal from bottom to top,WHAT A BEAUTY!!:t_up:. If you believe that its going to keep growing like that(other than a little hiccup atm with fruit rubbing up against each other in this storm) well why look around ;its not greener over the fence(but may be yellow thats where the money is:). Craigs have no research on it; not many do; ask for opinions on here and dig around until you are fairly confident where SEK is going. Certainly in a great sector and a sweet spot in the cycle atm , like SCL.

I agree with JT. It is all about where you think SEK is going in the medium term, weighed against other options. SEK has been steadily growing dividends and is on record saying they intend to continue doing so. Their growth and diversification has been spectacular last 2-3 years and future looking bright. On a "positive" note for you BB, their dividend yield rose quite a bit yesterday while this discussion took place as their SP dropped 5.6% :-)
No doubt some holders panicking about the cyclone.

[BIRMANBOY]

No argument regards the quality of SEK as an investment JT...its been very good and as Iceman notes below the dividend has been growing each year for the last 4 years. I was using SEK as an example of what sort of issues investors (or me specifically) have regards choosing when or if to exit a share. Leading on to really the key question I was trying to grapple with, which was... is it better to let capital growth sit and grow along with SP or is it more advantageous to extract the gains and put them to use somewhere else. I've come to the conclusion that there are too many variables to generate a rule/or formula that collates all of the information and spits out a definitive directive.
Where do you believe SEK is going BB?. Ive just had a quick look at the 5 year chart; diagonal from bottom to top,WHAT A BEAUTY!!:t_up:. If you believe that its going to keep growing like that(other than a little hiccup atm with fruit rubbing up against each other in this storm) well why look around ;its not greener over the fence(but may be yellow thats where the money is:). Craigs have no research on it; not many do; ask for opinions on here and dig around until you are fairly confident where SEK is going. Certainly in a great sector and a sweet spot in the cycle atm , like SCL.

[BIRMANBOY]

Yes Iceman I just lost $1100 of my proverbial profit whilst I was mulling over the complexities. What's that saying..."You snooze..you lose" I like to explore my options and make deliberate and calculated moves however so not to worry. Usually what happens if there is nothing compelling to come forth from the deliberations I usually stay with the status quo. I believe that this is one of those situations. Of course the other aspect is that if one is buying and selling for the gain theoretically when the gain has been realized the IRD is sitting there with their hand out. I prefer to be in a situation where BB is the full recipient.
I agree with JT. It is all about where you think SEK is going in the medium term, weighed against other options. SEK has been steadily growing dividends and is on record saying they intend to continue doing so. Their growth and diversification has been spectacular last 2-3 years and future looking bright. On a "positive" note for you BB, their dividend yield rose quite a bit yesterday while this discussion took place as their SP dropped 5.6% :-)
No doubt some holders panicking about the cyclone.

[percy]

SEK has seen eps growth, which has enabled them to pay increasing dividends,and the share price has followed.
I would not sell a winner until the yield went below deposit rates,and the PE ratio went to nearly three times eps growth.
A portfolio of winners is going to out perform a portfolio of doubtful high dividend payers,as you have found with SEK..
You are therefore better to hang onto you winners,and sell your poor performers, remembering dividend yield is only part of the investment jigsaw puzzle.

[Joshuatree]

Yep keep it simple, stupid:).If it aint broke don't fix it.