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Why the single property share like Redefine instead of PTXSPY or PTXTEN (which is equally weighted) and has Redefine plus a few more?

Another Wednesday and it is time to look at our LTS. Before we get to that though, there will be two more changes to the portfolio I would like to share. They are both changes I decided to make after listening to the Just One Lap podcast this week.

The podcast was all about small and midcap companies. One of the companies they discussed was a company called Santova. It is a company that deals in supply chain management which in my opinion is just a fancy way of saying logistics. Anyway, I decided to take a look at this company and this is what I found:

P/E 9.68 (I liked this very much)

P/BV 1.8 (0.3 higher than where I would like it to be but didn't bother me too much)

DY 1.42% (Pretty low but, again, not too bothered. I have DIVTRX and RPL who are both good dividend payers. I would invest in this company for the growth and not the income. Apart from that  they have consistently increased their dividends over the past 3 years. Not by much but still it is a good sign)

International Exposure: Operate in SA, UK, Netherlands, Germany, Australia and recently opened up shop in Ghana and Nigeria. So I get my international exposure I like so much.

Needless to say I liked what I saw so I invested and this investment will now form part of my core together with DIVTRX and RPL.

The second change is with regards to RMBMID. During the podcast they discussed it and the guest gave a good explanation as to why it might not be the best of ideas to be invested in the midcap index as a whole. Thus the RMBMID is being cut as well from the LTS. As for the rest, this is where we stand with them:

STXIND: 30EMA not above 60EMA. Check back next week.

STXFIN: 30EMA not above 60EMA. Check back next week.

DBXUS: Price no longer above the 15EMA. Check back next week.

DBXEU: 30EMA not above 60EMA. Check back next week.

DBXJP: 30EMA not above 60EMA. Check back next week.

Just a quick recap of what else happened this week. Added more cash to my position so the DIVTRX's share of my portfolio dropped a lot. Well that is due to the cash being added and the fact that the DIVTRX have been absolutely killing me since Friday. Added to my RPL position so its share grew and is now hovering around the 25% I planned for it. Got tired of the NFGOVI not reaching the price I wanted it to reach so thought I would take a gamble and dump them. Gamble did not go my way but at least I got rid of em...or most of them.

Portfolio:

DIVTRX: 50.55%

RPL: 29.31%

SNV: 5.84%

NFGOVI: 0.72%

Cash: 13.49%

See you guys again next week when I will also update how the portfolio performed as a whole for the month. It is not going to be good 

I am a day late so I apologise. I was a bit busy yesterday and just didn't have the time. But unfortunately I have to say I won't be doing the Lazy Trading System anymore. I came to a bit of a crossroads with my investing strategy and I had to make a choice. The first choice was to continue with core/satellite strategy and go for the growth. The second choice was to rather invest in undervalued stocks with high dividend yields and go for the income. The income can then be reinvested witch would help with growth as well. I decided to go for the income (should have followed your lead from the start Mr_Dividend). I think the LTS is good if you got some extra money you want to play around with but at this early stage of my investments I simply do not have that extra money and I just think it is a more sound strategy to invest in solid companies that pay good dividends. Like I said those dividends will be reinvested and thus provide the whole compound interest experience which in the long run can only do me good.

For all the people who were following this (which I am sure were not that many of you anyway) and hoping to see how well the LTS work I apologise. I will probably still post once or twice a month to let you know how my portfolio is doing and if I found something new to invest in. With that said though I will most likely stick with the 3 companies I am invested in right now and, as long as I feel their shares are undervalued, whenever I add cash to my position it will go into buying more shares in those companies rather than buying shares in a new one.

I still have my DIVTRX shares but over time I will sell them all and invest that money in RPL, TEX and SNV instead. RPL and TEX will make up the greater chunk of my portfolio, about 90%, and SNV the other 10%. SNV does not really pay that high of a dividend but they have steadily been increasing it every year for the last 3 years and apart from that I feel the have great growth potential. So I guess that will be my one purely growth investment  With their shares being as cheap as they are it means I can throw my big bills towards RPL and TEX while throwing my small change towards SNV.

Anyway, as things stand this is what my portfolio looks:

DIVTRX 50.07%

RPL 28.96%

TEX 14.43%

SNV 5.91%

Cash 0.63%

Growth for SEP: -1.9%  (DIVTRX really killed me this month!!!  )

Growth since inception: -6.61% 

Well I guess there are some things that need be clarified. The most important thing to understand is that I will be adding considerable amounts of cash to my portfolio every 2 to 3 months. So if I get dividends paid out to me I will wait until that cash has been added to my portfolio and then I will use that cash combined with the dividends to buy more shares. I will not buy shares if the dividend amount only amounts to a couple of thousand rand as I understand the fees involved with buying shares will definitely decrease the value of the purchase. Buying in bulk will be more worth my while rather than getting the dividends, only buying a small amount of shares, and then later purchasing again when I add cash to my portfolio. The fees will destroy me.

Also, as I mentioned, before I buy more shares in any of those companies I will do my due diligence and see if the P/E, P/BV and DY are still at acceptable levels to make the purchase worth it. If not I will look for something else to invest in or just hold on to the cash until those indicators have gone back to more acceptable levels.

With that said, however, I still do not think you should knock the whole reinvestment strategy entirely. If you have a large enough amount to invest at the start it can really serve you well and over the long term it can give you good growth. I will give you an example as to how I see it.

Say you have R50 000 to invest. You look at Texton with the following numbers:

Share price - R10 (Which is roughly where it is now)

Dividend Yield - 8% (Which is roughly where it is now)

So you buy 4900 shares of Texton using the extra R1000 (which I know won't be THAT much) to cover the fees. After a year you receive  R3 915 after withholding tax. That is what you would have received this year if you had 4900 Texton shares. Now say the share price stayed somewhere between R10 and R11 mark then you use that R3 915 to buy another 350 shares using the rest of the money to cover the fees. The following year, for 5200 shares, you receive R4 420 in dividends after withholding tax. I came to that number by adding 5 cents to the year's dividends. I think that is a conservative amount to add as Texton has, on average, added about 10 cents to the dividend each year. But ok, say this year the price for one Texton share is now between R11 and R12. So you use that R4 420 to buy another 350 shares and use the rest to pay the fees. Over the next year, for 5550 shares you get R4 953 in dividends after tax.

Now I can go on forever but you see what I mean. Over the long run those small increments your dividends grow in can add up to a lot. I also understand my explanation was very simplistic and speculative in its premise but I just did it for argument's sake. I cannot predict that Texton's share price will only grow by R1 a year nor can I predict that their dividend payout will grow every year if at all. But at the same time, if I were to go for growth rather than income, I can also not predict that anything I invest in will grow at all. With each strategy we choose for ourselves we can only do our due diligence to the best of our capabilities and hope for the best. What I like about the income strategy is that even if I don't get growth I will still get good dividends, by investing in something with a high DY, which I can use to buy more shares. And quite frankly, if those shares didn't grow much in worth it serves me much better as it means I can get more shares for my dividend which in turn will mean I can get a higher dividend next time.

I hope you understand my reasoning behind it all and whatever strategy you decide on I hope it works out well for you 

I also hold my divvies until I do my monthly purchases, then I just buy for more.

Incidently, if you use easy equities, there is no minimum fee, so if you really wanted to, you could reinvest immediately.

I'm expecting your new strategy to outdo your old one. Pity we can't compare hypothetical accounts!

Still not sure how to interpret the end result of those persons who want to pursue a dividend stream as a form of income. Here's my problem (understanding of course) to get a decent return of more than 7% you may have to be in some risky resources stocks, which will be subject to divi taxes. Investing in property funds which generate a relatively high interest component would eat up your interest allowance per tax directives.
Also to generate sufficient dividends your capital in the market would be substantial and would be upwards of R 3.0 million to get a half decent "income". Further if your capital appreciates (as hopefully it should) once you sell a portion you lose that portions dividend/interest income. You would then have to invest that capital once again into another instrument to replenish the dividends/interest lost
So if this is the thinking behind trying to optimize the dividend/interest stream, then surely shouldn't one be considering dumping funds into an RA or a Retirement Fund for future income off these funds.
Maybe if I understood what the end objective is/was for pursuing a dividend/interest stream as opposed to a capital appreciation model then maybe I could understand the logics of the approach   

Still not sure how to interpret the end result of those persons who want to pursue a dividend stream as a form of income.

Kind of tried explaining it a month ago when you also asked. Apart from that explanation there is not much else I can say. It's just chasing the compound interest effect. For me personally though there is one more reason. I save and invest a decent enough amount each year but I feel it is not enough. I want to be able to invest more than I currently am able to. If TEX and RPL payout the exact same amount in dividends over the next year (which I am pretty sure they will actually increase incrementally) I will basically be getting a whole extra month's salary from those dividends. That's a whole extra month's salary for me to invest on top of what I am already investing. I know I will not always be invested in a fully dividends portfolio but it suits my purpose right now. And you should also remember that just because you go for divvies it does not mean you are not getting any growth. Just like all stocks div stocks grow over time. I guess all I can say is give this a year and ask me again then. Then I will be able to give you a clearer answer on how it all went for me.

Also, once my holds on TEX and RPL reach a certain value I plan to stop investing in them and go back to ETFs. STXIND and DIVTRX probably. With these two I will be going for the growth over divvies option. Then once my investments in them reach the same levels invested in the REITs I plan to stop investing in them as well. I will then go and try to copy Simon Brown's Momentum portfolio. Setting up these three different phases of my portfolio will probably take another year and a half to set up but once it is done I will have a clearer picture as to what strategy I want to follow into the future and this will stop being an experiment.

Of course in between all of that I will probably throw in a few odd balls and gambles as well. Just to keep it interesting.

@Fawkes85 ... can I ask why you bought FDP? There is potential but the original sellers still have alot of shares than seemingly are being dumped onto the market where possible, thus keeping the price down. Added to this, even more share are being issued.

The reason I bought into FDP is because at current prices the P/E and P/BV are at acceptable levels. FDP is now selling at a discount. And they may be dumping their stock and issuing more stock but they won't do it forever. In my personal opinion FDP will be trading at around R2 in 2-3 years time. If I am right I will walk away from this with a big smile on my face.

Quote from: gcr on November 02, 2015, 10:00:05 am

Investing in property funds which generate a relatively high interest component would eat up your interest allowance per tax directives.

Aren't property funds now seen as income rather than interest since they converted to REITs?

Not sure, but if it is the case that they are treated as income then there is a further problem as it is likely to put one into a higher tax bracket with little opportunity to reduce once taxable income
Just as an aside - I have yet to meet anybody who has become wealthy by selecting high dividend yielding counters as a source of income, but, I have met many who have become wealthy through share price appreciation. One of the reasons I keep R .5 million on 6 monthly FD's is to get the interest stream, and also to deflate my tax burden with the allowed deduction for over 65's.
However I read that the taxman may do away with this aspect of interest neutralisation