AIR - Air NZ.

[banter]

I hope that you are not simply subtracting the dividend amount from prior share prices, consider the $1 share that has paid out more than a $1 of historical dividends.

Certainly am, and yes the corrected price can go negative. Same with historic commodities data. Apparently that's OK for backtesting purposes - moving average, Donchian, Bollinger band systems still work OK.
Am looking forward to my since-purchase THL adjusted share price going negative soon, and AIR in a couple of years.

Adjusting for the lack of imputation credits is incorrect.
A 5cps dividend costs the company 5cps per share independent of whether it all goes to the shareholder directly or is split between the shareholder and the tax man.

I guess that is true of the break-up value of the company - it is worth 5c less.

But I look at it this way.
Say the company's share price was $1. It paid a 5c unimputed dividend. I then pay tax on that dividend (let's say at 28%). I'm left with 3.6c. If, as you say, the correct ex price is 95c - then adding 3.6c gives 98.6c.
In theory, the market will price shares so that the shareholders are no better or worse off after a share goes ex.
If most shareholders pay around 30% tax, they will price that share such that when it goes ex, it is worth 3.6c less. Not 5c.

Otherwise, shareholders would be selling the company before it goes ex, to avoid the above 1.4% capital loss. And maybe buying back after.

Non-accountant logic. Fire at will.

But how do you account for the discount on Dividend Re-Investment Plans?
and
how do you account for the supplementary dividend paid to overseas shareholders?

Personally, I ignore both. The discount on DRIP is trivial - say 5% of a 3% div, taken up by 20% of shareholders.
And (as I understand it) the company gets that supplementary dividend back as a tax credit.

A final off-topic thought - the NZ50 is supposed to be a benchmark, against which NZ investors measure their performance.

No investor can match the NZ50 by copying the NZ50 because:
1) NZ50 pays no tax on non-imputed dividends - investors do.
2) Trading costs - brokerage, slippage.
3) NZ50 reinvests dividends on the day they go ex - investors must wait till the dividends are paid.

All in all I reckon the true annual benchmark is at least 2% below the NZ50's performance.

[percy]

A final off-topic thought - the NZ50 is supposed to be a benchmark, against which NZ investors measure their performance.

No investor can match the NZ50 by copying the NZ50 because:
1) NZ50 pays no tax on non-imputed dividends - investors do.
2) Trading costs - brokerage, slippage.
3) NZ50 reinvests dividends on the day they go ex - investors must wait till the dividends are paid.

All in all I reckon the true annual benchmark is at least 2% below the NZ50's performance.

So it is therefore incorrect to compare charts of AIR,HNZ or PGW with the NZ50?

[winner69]

I would never adjust for dividends. Its what I can sell them for that concerns me. I don't really care for dividends - just a bonus if they come.

And I'm told by many on this forum that more likely than not the price quickly reverts to the price before the dividend anyway.

And then some tell me the price 'includes' the dividend some weeks before it goes ex anyway - so when do you 'adjust' from?

[Beagle]

I thought you, me, Luxon et al agreed the other day that economic conditions have little impact on demand for air travel.

The so called 'cyclical' nature of airline stocks is because of price of oil / currency impacts on earnings (not demand)

As an aside the NZ economy is chugging along quite nicely methinks

No not strictly correct mate. Severely adverse economic conditions definitely affect demand. I had a quick look back through the annual reviews over the last 7 years and they definitely were affected by the GFC, much like the vast majority of other companies, no question. All previous years reports are available on their website and I recommend anyone serious about investing in AIR have a look back over the history of the company by reading the annual reviews from previous years to enhance your understanding of the airline. See http://www.airnewzealand.co.nz/previous-reports

I think its a great credit to the marketing team that through a creative and proactive approach they've managed to fill the extra capacity they put on last year. The SP has come under pressure in recent months from the sort of scepticism encapsulated in the Morningstar report that Robomo provided commentary on late this week. It seems some research houses and institutions simply don't believe the company can fill the extra capacity they're putting on this year in the somewhat softer economic conditions. Perhaps consumers are just sick and tired of austerity and they will simply spend and to heck with it, latest electronic card spending data out today suggests the consumer is generally in good spirits.

The company is extremely confident about its future. The tone of the annual meeting overall was extremely bullish. People are free to listen to Morningstar if they like but I for one will take my cue in terms of expected profitability from the company itself.

[banter]

So it is therefore incorrect to compare charts of AIR,HNZ or PGW with the NZ50?

Yes - I think, like you said, you'd have to add divs to those share prices as they go ex to get a fair comparison.
NB dividend payers are discriminated-against, ironically, when it comes to selection for the NZ50.

[winner69]

No not strictly correct mate. Severely adverse economic conditions definitely affect demand. I had a quick look back through the annual reviews over the last 7 years and they definitely were affected by the GFC, much like the vast majority of other companies, no question. All previous years reports are available on their website and I recommend anyone serious about investing in AIR have a look back over the history of the company by reading the annual reviews from previous years to enhance your understanding of the airline. See http://www.airnewzealand.co.nz/previous-reports

.

Passenger numbers I put up confirm that, esp when severe adverse economic conditions exist.

Wouldn't want to see another GFC soon will we. A 5% to 10% drop in revenues falling straight through to the bottom line is $250m to $500m off your $1 billion forecast - ouch

Maybe those analysts have good cause to be cautious

Doubt if another GFC like last time - if there is anything it will be a total collapse of world economic order as we know it

No need to worry - this week AIR share price will head to 3 bucks

[Beagle]

Passenger numbers I put up confirm that, esp when severe adverse economic conditions exist.

Wouldn't want to see another GFC soon will we. A 5% to 10% drop in revenues falling straight through to the bottom line is $250m to $500m off your $1 billion forecast - ouch

Maybe those analysts have good cause to be cautious

Doubt if another GFC like last time - if there is anything it will be a total collapse of world economic order as we know it

No need to worry - this week AIR share price will head to 3 bucks

Personally I don't think we're out of the first GFC by any means and central banks around the world are basically going to have to keep interest rates ultra low indefinitely to deal with the debt legacy hangover issues. IMF suggests low economic growth, (forecasting oil to still be $55 barrel in 2017) and this is the sort of environment where the oil price could very well stabilise at these lower levels for years...meanwhile all those emerging middle class consumers overseas that C.L. was talking about in the meeting who see air travel as aspirational will be keen to travel and tick good ol Nue Zeealaaand off their bucket list will come here. Maybe we have the perfect environment for Air to make super profits for several years and those conservative analysts get egg all over their faces while out bank accounts get lined with special divvy's I reckon some analysts see AIR's capacity growth as a bit risky. I think its a calculated risk...easy enough to pull back the frequency, (to keep the load factor up), to those new destinations if loads don't turn out to be quite as good as anticipated in the medium term but they're very bullish about early customer demand most especially out of Australia, (see Australian aviation magazine October 2015 issue, article on AIR).

Hey Couta1. Mate, you're in an elite group. Page 60 of the annual report, the top 20 shareholders own 90.61% of the shares, (Govt own 51.95%). Page 61 Only 96 shareholders own 100,000 shares or more. Take out the top 20 which except for one are all institutions or the Govt and that leaves only 77 shareholders who own more than 100,000 shares.

You should definitely come to the annual meeting next year and hit Chris Luxon up for that special behind the scenes gold elite Koru lounge thingy ...but as I know you're a gentleman and a humble guy I bet you just fly economy like I do and probably not even a member of the regular Koru club. Well leave all that prancing around gold elite status stuff to others eh ?

[couta1]

Your right Roger just normal economy for me and no Koru club stuff neither. Happy to be overweight in this stock and feel privileged to be part of that group of 77

[iceman]

You should definitely come to the annual meeting next year and hit Chris Luxon up for that special behind the scenes gold elite Koru lounge thingy ...but as I know you're a gentleman and a humble guy I bet you just fly economy like I do and probably not even a member of the regular Koru club. Well leave all that prancing around gold elite status stuff to others eh ?

You will never make AIR Gold Elite by flying Jetstar mate

[Beagle]

You will never make AIR Gold Elite by flying Jetstar mate

LOL - The only club I want to join is the truly elite one one with only 77 other members Having 100 members to that behind the scenes thing is so passé