KFL - discount to diluted NAV

[Rawz]

Alokdhir and Beagle pumping the same stock. Dream team

[alokdhir]

Alokdhir and Beagle pumping the same stock. Dream team

Buying or investing in the same stock is more correct as we both see " Deep Value " in it at current levels ...lol

PS : Maybe we have same goals and needs ...retirement income

[JeffW]

Now that Mr B has disclosed " Significant " investments in KFL at current SP and also endorsed that its a great buy at 8% discount ...I expect better support to my original idea of KFL being excellent value buy at present ...hopefully now people will not expect 20% discounts to NAV as before ...lol ...but u never say never in markets ...anything can still happen ...but odds are in our favour ...

PS : As per his calculations KFL yields 13.43% at current discount for 33% tax payer on DRP ...on 39% it will be 14.75% ...mind boggling !!!

The yields for KFL are a complete and utter red herring, and don't stand up to the slightest scrutiny at all. Where do you think the yields come from - there's only two sources:

1. The dividends actually received on the KFL portfolio - all well and good but certainly not sufficient for 13.43% or anywhere close
2. The balance comes from the sale of parts of the portfolio, and therefore turning them from capital to income (admittedly PIE income) in the hands of the investor

That's not to say KFL might not be a good investment, especially for 39% tax-payers, but the supposed dividend yield certainly does not make it so

[alokdhir]

The yields for KPL are a complete and utter red herring, and don't stand up to the slightest scrutiny at all. Where do you think the yields come from - there's only two sources:

1. The dividends actually received on the KPL portfolio - all well and good but certainly not sufficient for 13.43% or anywhere close
2. The balance comes from the sale of parts of the portfolio, and therefore turning them from capital to income (admittedly PIE income) in the hands of the investor

That's not to say KPL might not be a good investment, especially for 39% tax-payers, but the supposed dividend yield certainly does not make it so

This questions has been discussed and fully understood by long term investors ...they come from capital growth of blue chip growth stocks more then their dividends so if u think IFT / MFT/ FPH / SUM / AIA will never grow in value then maybe one day KFL will become 0 !!!

I gave my personal example before ...which it seems u didnt read ...again I repeat ...I invested in KFL in April 2010 @ 92 cents ...got 10 cents dividend the same way ...better to call it distribution ...and even in big downtrend its almost 50% above my purchase price ...in absolute terms I got 130 Cents distributions plus 40Cents warrants benefit plus 39 Cents capital gains = 209 Cents ...spread over 13 years on 92 Cents investment ...2010-2023 is long enough to know their model of distribution works alright for income

[JeffW]

This questions has been discussed and fully understood by long term investors ...they come from capital growth of blue chip growth stocks more then their dividends so if u think IFT / MFT/ FPH / SUM / AIA will never grow in value then maybe one day KFL will become 0 !!!

I gave my personal example before ...which it seems u didnt read ...again I repeat ...I invested in KFL in April 2010 @ 92 cents ...got 10 cents dividend the same way ...better to call it distribution ...and even in big downtrend its almost 50% above my purchase price ...in absolute terms I got 130 Cents distributions plus 40Cents warrants benefit plus 39 Cents capital gains = 209 Cents ...spread over 13 years on 92 Cents investment ...2010-2023 is long enough to know their model of distribution works alright for income

Good for you. I'm not arguing the merits or otherwise of KFL as investment - I am just stating the fact that the supposedly superior Dividend Yield element is completely misleading and irrelevant to the investment decision for the likes of KFL

[alokdhir]

Good for you. I'm not arguing the merits or otherwise of KFL as investment - I am just stating the fact that the supposedly superior Dividend Yield element is completely misleading and irrelevant to the investment decision for the likes of KFL

It's not dividend but its distribution which comes from real dividends PLUS capital growth of blue chip stocks ....they DISTRIBUTE 2% of NAV every quarter ...so it provides quarterly income for retirees like me ...also its tax efficient . But one need understand its coming majorly from capital appreciation part of the blue chip portfolio ...which I reckon all here do

[SPC]

Well JW, I'll state a fact or three for you. I have held a large position in KFL built over 17 years. My holding cost today has more than been paid for in distributions, on top of that I have profits from selling down at market peaks, and my fully paid capital position could be sold anytime on market for the value on the day for a total profit.
You need some better facts I think.

[JeffW]

Well JW, I'll state a fact or three for you. I have held a large position in KFL built over 17 years. My holding cost today has more than been paid for in distributions, on top of that I have profits from selling down at market peaks, and my fully paid capital position could be sold anytime on market for the value on the day for a total profit.
You need some better facts I think.

I think you're missing the point - I certainly am not trying to suggest KFL is a poor investment - I've stressed this several times. The point I am trying to make is that to the extent that the dividend/distribution is made up of payments out of capital growth on the investments, it is simply turning capital receipts into income receipts (albeit PIE income), and thus a conversation about yield percentage is non-sensical - and certainly turning what would be capital receipts into income receipts is not tax efficient in the slightest. Nothing more, nothing less. I appreciate that it may suit you to have a quarterly receipt, and I'm certainly not arguing against it.

[SPC]

I feel we're slipping towards the 'aerodynamically speaking- bumble bees can't fly' argument.
Turning capital (gains) into income is actually extremely tax efficient as it happens. If it weren't the left side of politics wouldn't be bleating so much as they are..?

[moose]

The yields for KFL are a complete and utter red herring, and don't stand up to the slightest scrutiny at all. Where do you think the yields come from - there's only two sources:

1. The dividends actually received on the KFL portfolio - all well and good but certainly not sufficient for 13.43% or anywhere close
2. The balance comes from the sale of parts of the portfolio, and therefore turning them from capital to income (admittedly PIE income) in the hands of the investor

That's not to say KFL might not be a good investment, especially for 39% tax-payers, but the supposed dividend yield certainly does not make it so

Can someone with a bit more knowledge clarify something for me.......

1. We all agree that the 8% of NTA annual divvies come from a mixture of dividends received on the underlying investment + sales of some shares in the portfolio (or recycling of money saved by issuing shares under the DRP instead of cash divvies +/- new investor money e.g. via warrants) - I haven't looked at the data for "total shares in circulation over time" which would be interesting.
2. If you owned the underlying shares in the same proportion you would get dividends (incl imputation credits) and (hopefully) some tax-free capital gain.
3. KFL dividends include 2 components a "fully imputed" amount and an "excluded income" amount - the latter comes with the instruction to not include it for tax purposes (yes, I know that most people don't include any PIE income on a tax return)
4. My understanding of the KFL dividend structure was that this "excluded income" represents the capital gain.

So getting to the point........If the above is true and the "fully imputed" part of the dividend is only around 20-30% of the total then the calculation of effective rates of return for individuals with a 33/39% personal tax rate is a bit more complicated as you only make a "tax saving" on the part that is subject to tax not the excluded income - overall the tax savings would only be about the same as the additional management fees for holding KFL instead of the underlying shares.

None of this changes the arguments about buying below underlying nta or having a "no hassle" income stream but I would appreciate any comments about claims that KFL yields close to 15% gross for 39% tax payers by paying a PIE net 8% of nta.