What happens when you go behind DIVIDEND YIELD ignoring GROWTH...

Educational thread based on learning from Mr. Market...

No recommendations..


In 2017 approx dividend Rs. 20 >> Price ~250; Yield 8%..

You might think its better than FD+tax free

Next year dividend ~16; Price in 2018 ~270; Yield ~6%..

You say not bad...interest rates are down...so still better than FD...

You see bit of current growth in PAT and say to yourself..market is wrong...I am SMART :)

Fast forward in 2019...price ~220, Dividend ~15...Yield ~7%...not bad...still beats FD...

Growth still ok...you say...Acche Din Ayenge...console yourself with dividend yield

You enter 2020....and as always market is smart most of the times

Price - 120; Dividend - 12; Yield - 10%

You still feel good if you did not get it...wow 10% yield is superb.

TTM PAT growth negative 22%....share price almost half...

Think yourself: Did you make money?

Another company and I was invested in it few years back (no positions)

Ambika Cotton...capex planned but took ages...I thought still giving 3-4% yield..not bad..

Excellent management, Excellent products..

Hardly any growth, difficulty to do capex, sector tailwind

In 2016 share price at 800 Rs.; EPS 72 Rs....

Fast forward 2020: share price at 700 Rs.; EPS 76 Rs.

5 year profit CAGR >> 0%

Case 3: ITC

High RoE cigarette business suffering...growth tapering...govt finds it lucrative to tax these companies heavily..

Price in 2016 ~250; Dividend >> 8; Yield ~3.2%

Fast forward 2020

Price 185; Dividend >> 10 Rs. Yield ~5.5%

5 years PAT CAGR > ~10%

What are the lessons here:

As an investor, growth and reinvestment of cashflows at high ROCE is what creates compounding engine for companies

Think about...

Why dividend is increasing or yield is high?

Due to lack of re-investment opportunities?

Headwinds in Industry?

Is the sector sunset sector? Is company just barely able to survive?

If it's re-investing cashflows, is it in high RoE segment or dull segment that sucks capital (eg. Hotel, Infra etc.)?

Is company facing too much of competition?

Is moat getting eroded?

If current growth is decent, why is market pricing company like this? What about future? Can I see good growth visibility? What are the triggers?

If you want to learn more...you can join my masterclass >> technofunda.co/webinar


• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Vivek Mashrani, CFA

Vivek Mashrani, CFA Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @MashraniVivek

1 Apr
Lessons of bull market....thinking to create a thread where I will keep posting on euphoria phase we all had been into.

No offense to anyone, we all are human and we make mistakes, just for serious learning.

1st one - euphoria on housing finance

Second: Quest of multi-baggers in microcaps in 2017.....even after fall people had contrarian views that this space will bounce back...


This just a snapshot of kind of value destruction that has happened in microcap space...

Source: @screener_in

Read 12 tweets
12 Mar
Was studying some historical falls to draw some meaningful patterns if any, let's take 2000 dotcom crash...Nifty fell from highs of ~1800 to nearly ~850 i.e. 50%+ down...and initial falls were not as severe as currently what we are witnessing + it had multiple pullbacks (1/n)
(2/n) RSI gave multiple oversold signals, infact premature and after each signal it kept falling 15-20% more...again with multiple tiny pullbacks...again note that to breakeven 50% fall you need 100% upmove....200 WMA were meaningfully broken..now let's take example of 2008
(3/n) In 2008, from highs of ~6250 nifty fell to ~2250, almost 60%+ fall...again with multiple pullbacks & some really sharp moves at the end of fall...again RSI near oversold zone multiple times..200 WMA broken meaningfully..remember to recover 60% fall you need ~3x to breakeven
Read 6 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!