Category: Dividend update

Regular readers of this blog may have noticed a drop in activity levels of late. This is partly because I have been finding it a bit more difficult to come up with new topics on a weekly basis, but also because this blog is more a means of documenting my investment journey, rather than a revenue source in itself (in fact it makes no money and costs some money to run). As such I have found that thinking of a topic every week and then writing it has distracted me a little from the primary way I earn a living, which is investing.

The initial aim of this blog was to document my journey with regard to dividends earned from US and UK stocks. So far there have not been any dividends from these sources, hence the slight change in direction. I am living in South Africa, and the aim is still to invest in the US and UK as a means to diversify out of an emerging market, that has not changed. However, what has changed since I begun this blog, in my opinion, has been the wonderful stock opportunities presented in South Africa. This combined with what was an extremely weak currency when I started this blog has made offshore investing less attractive to me, for now. Had I invested out of South Africa 6 months ago I would be looking at 30% losses purely on the currency movements.

New direction

In light of the above points I have decided to refocus this blog to be about investing in general, especially the psychological side of it, which I believe to be incredibly important. I will also share more about my stock market efforts in South Africa, as this is the market I know best and where I believe I have a competitive advantage. I will still share with you any analysis and moves I make into US and UK stocks, although I do not think the dividend updates will continue. I do think this is a rather crowded field and there are literally thousands of dividend blogs providing this sort of material. I am not sure how many of them are honest, but it is not a competition I want to compete in.

What has been happening

• Hotels..

It has been a very good period of what I would call ‘Active patience’ which I believe is setting me up for some good growth to come. I am still sitting with my hotels, see last post on the matter here . This saga continues, but fortunately since my last update there has been a piece of good fortune, the buyout price from the majority holder of the stock was raised from 65c to 85c. This was always on the cards, but not expected. There is still the matter of a circular and a vote to contend with, and so it is not a done deal, but at this price, if it is successful, it means my return on investment increases remarkably, and will be close to 70% profit on a fairly short holding period. Here is the graph of the stock price on the day of the revised offer:

This ‘victory’ is one I am rather proud of, in that it is the first time I have been involved in any sort of shareholder activism, and I do believe the increased offer was due to a few of us minority shareholders voicing our discontentment with the price originally offered.

The downside is it has delayed the receiving of any funds, but for an extra 30% return, I am willing to be patient.

•  Search for new ideas

The promise of a fresh injection of capital from the sale of my hotels has long been on my mind, but the boost received of late has refocused my research, and I have been working hard on researching some companies in South Africa which I believe will make for excellent investments when I have the funds. These include the manufacturing, property, retail, beverages and fast food sectors. Some of the value on offer is really good in what I believe are high quality companies. I will in due course share some of these ideas with you.

• Reading

I do believe that the most important job of an investor is reading. It really is vital to try and obtain the best knowledge possible about the world around you, about various industries, companies and business leaders. I think it is sometimes difficult to justify to those around you that you are ‘working’ when reading a book or business magazine, but really that is what it is, even if you happen to enjoy it. Investing is accumulating knowledge and then applying it. It has been a particularly good period for me, where I have stumbled upon or found some incredibly good books. Two that I will mention because I can thoroughly recommend them are:

Keynes and the Market: This book is the story of how this world renowned economist, John Maynard Keynes, became an incredibly successful value investor, and ended up making a fortune on the stock market. His methods really resonated with me, and I will write about this at some point.

Pour Your Heart Into It: This is an early stage (1997) book by Howard Schultz who propelled Starbucks from a tiny Seattle coffee company into the global giant it is today. If you are a regular reader you will know Starbucks is on my radar, so this was a very interesting book for me. I have read more recent books about Starbucks, but it was extremely interesting to read a book about the earlier years.

Finally, taking a break at Dunkin Donuts..

One of my cornerstone investments is in a company called Grand Parade Investments. This is a company that I have owned since 2010 and have steadily been increasing my equity stake in. I go to the AGM every year, and follow them closely. The current focus is on building a large food business. They have had the South African license for Burger King since 2013, and now have over 60 stores. They have also obtained the license to operate Dunkin Donuts in South Africa. I think this will be successful and with every store opening, my business expands. I went a few weeks ago to see it for myself, I was especially keen to try the coffee which I have heard good things about. Unfortunately (or perhaps fortunately) the queues where so long I was not able to get a coffee and had to be content with buying some donuts on the side.

 

They are opening another branch this weekend so I will perhaps try the original store again for a coffee. You may have read my article Visiting your dividend machines, this is my favorite part of the job, especially in this case..

Conclusion

Thanks for bearing with me. I hope you will find the change in direction agreeable, you are welcome though to let me know what you think.

Further reading:

July 2016 Dividend Income: Nil

In previous updates I have touched on the reasons for not investing in US or UK stocks yet. At the moment I am waiting to receive funds from the sale of a small hotel stock, but more on that later.

My patience in not taking capital out of my home country has thus far been rewarded in that the local currency has been strengthening against the pound and dollar over the last few months and is over 25% stronger than the low point. Having said that, I do believe that when I have some fresh capital, now would be a good a time as any to invest into stronger currencies. I am hoping this will be fairly soon.

I do have dividend income in South Africa, which I currently use to cover part of my living expenses and which I have chosen not to disclose.

There are a few developments in my journey as an investor, which I plan to write about over the coming weeks, mainly the following:

• The possibility of me becoming involved in some sort of stockholder activism. I am specifically referring to my hotel shares for which a delisting and buyout has been proposed. Initially I was very happy about this, you can read here about it. However, I have had the opportunity to talk to other minority shareholders, who believe the price should be far higher. I am willing to get involved in such an action, as this could increase my capital base, but is of course far from certain. I will keep you updated, it is something new for me, and perhaps would be interesting for others.
• I have been doing a lot of reading, and am more convinced than ever that finding excellent companies is not as straight forward as it used to be. In particular I have been reading a book, as well as other information, about Amazon.com. Reading these books and documents has caused me to sit back and evaluate many aspects of my portfolio and investing strategy into the future. There are a few angles here, and I will share my thoughts with you in the coming weeks and months.

What I love about investing is that you are always learning interesting things, and the more you learn the more you want to learn. Each fork in the road takes you to another interesting road. I hope you will stick around to read some of my thoughts. Let me know if you have any comments or questions.

June 2016 Dividend Income: Nil

Please see what I wrote in May for further explanation, but basically I have been finding better value in my local market than in the UK/USA where I am wanting to invest for the purposes of this site.

This has been fortunate to some extent, especially the fact that I have avoided investing in the UK, following Brexit.

Brexit has though created some possible opportunities. I wrote about one, Intu Properties PLC, in my last post, which is the owner of 9 of the 20 largest shopping malls in the UK. I am keeping an eye on this and other opportunities which I may be able to take advantage of when I have the funds.

I did buy 4620 shares (cost of roughly $1600) for my local South African portfolio in a stock called Choppies (stock code: CHP), which is a food retailer based in Botswana, but rapidly becoming a pan-African retailer with operations in Botswana, South Africa, Zambia, Zimbabwe and Kenya. They target the smaller towns, overlooked by the larger retailers, much like Walmart did in the United States. I have been accumulating small amounts of this stock for a year and plan to continue to do so.

Firstly, apologies on the late update. I have been giving some thought as what to do in terms of providing a monthly update. I am not sure whether readers are actually interested in seeing my dividend income, or whether you come to the site for articles about investing.

In addition, my plans for dividend income from US and UK stocks has been somewhat delayed, and it is slightly pointless giving updates when nothing is happening. Currently my preference has been to invest in my home country stocks as there are some stocks with great growth prospects and high dividend yields. For example I have invested in a real estate stock giving an initial 14% dividend yield and I find such opportunities difficult to pass up. Longer term I think the cash flow from these higher yielding stocks will find its way to the international stocks that I am wanting to buy, but in the short term I am trying to be disciplined and not buy stocks because they will look good on my blog.

My cash flow was also dealt a blow by my investment into an illiquid hotel counter which I wrote about in my last post, see here http://www.dividendtycoon.com/blog/2016/06/04/reflections-on-buying-a-cheap-hotel/  I will need to be patient on this investment before I can sell some stock.

I have decided I will keep providing the updates, although any feedback would be welcome as to what you would like to see. However, I must confess that progress is likely to be slow and it may be some time before I start to post dividend income.

I hope you will continue to read the blog though, and find inspiration here towards becoming a Dividend Tycoon in your own way.

April 2016 Dividend Income: Nil

I have not purchased any international stocks yet. The main reason is that I have been using any cash flow I have to buy two stocks in South Africa. One is what I consider to be very similar to Shake Shak in the USA, but at a far lower valuation as the Shak Shak part is still a small part of the business; the other is a retailer that I hope is similar to an early Walmart, but on the African continent. I believe that allocating capital to these two ideas will reap greater long term benefits, and dividends, than any current ideas I have with US or UK stocks. (Please see further on about my thoughts on a separate site to let you know more about such stocks, should there be sufficient interest.)

I am somewhat frustrated by not having made a purchase of an international stock yet as I am itching to buy, but feel that I cannot let these opportunities pass, while the valuations are reasonable, and the valuations on my shortlist for international stocks are fairly stretched. I have recently read Howard Marks excellent book “The most important thing”, and what he really drums home is that an excellent business is not always a good investment. He is referring to the fact that popular investments are often over priced. I have tried to remember these words, and will only allocate capital where I see the best investment case.

All the same, I must confess that I  am very tempted to buy Starbucks, and intend to write an article about this company, while watching the price, which has become slightly cheaper recently on weaker results.

I have already written an article about one South African company which I have invested in, which has the rights to the Burger King franchise in SA. I think there was a fair amount of interest, and am thinking of a separate site which highlights stocks in South Africa, and the rest of Africa. Please let me know if you would have any interest in hearing about such stocks so that I can gauge the interest, as well as any other feedback you may have about this site.

 

 

March 2016 Dividend Income: Nil

I do not have any dividend income from international stocks to report. As I said in the section of the site about myself, I expected a slow start. On the positive side, I am expecting some good cash flow soon, as my largest holding in South Africa is due to declare a dividend, hopefully.

There are a few reasons for the slow start. There is the current issue facing any investor from an emerging market economy, a weak currency. South Africa, like Brazil and Russia, has experienced a sharp depreciation in the value of the currency with which I earn. This can be due to issues as random as the country’s credit rating, over which one has no control. This has been quite scary at times, and added to that the political risk which has increased as a result, has been one of the reasons which made me want to become a Dividend Tycoon with international stocks.

However, one of the keys of investment success is not too rush into an investment due to fear, or to sell when there is blood on the floor. Currently there is blood on the floor when it comes to the South African rand, the Brazilian real or the Russian ruble, and converting these currencies into dollars or pounds right now may be a classic investment mistake. So, in short there is no rush right now. However, one should also not try to time the markets too much, and I am determined as ever to start on this road, so watch this space in the coming (perhaps a few) months. I am warming up and ready to go. I am increasing my knowledge on international stocks, I am currently reading a book on Wal-Mart in fact, and i have some stocks in mind. I cannot wait to deploy some capital into these stocks!

Please bear with me for now, or let me know about any suggestions or comments you may have.