I Just Commented On A Company

I Just Commented On A Company

I Just Commented On A Company

Copyright © 2023 by Patrick Hanna

All rights reserved

TABLE OF CONTENTS

CHAPTER 1 : TYPES OF SHAREHOLDERS SUCH AS

CHAPTER 2 : THE BIGGEST MISTAKE

CHAPTER 3 : ONLY JUNICHI HASEGAWA

CHAPTER 4 : PURSUE MY GOALS UNTIL I SUCCEED

CHAPTER 5 : CORPORATE GOVERNANCE

CHAPTER 1 : TYPES OF SHAREHOLDERS SUCH AS

Educational institutions and pension funds that do not have to pay income tax. There are also individuals whose dividend income is less than the $50 exemption figure, although the total amount of shares held by this group appears to be quite small. For these special groups, the equilibrium equation will be different. However, for most shareholders, regardless of size, there is no escaping this reality of dividends. If they save any of their income instead of spending it, and invest it in the right common stocks, profits will increase greatly when the company's management reinvests them. retained earnings compared to the profits they would achieve if the company paid dividends and had to reinvest themselves.

Using 100% of the budget for other things instead of receiving a single small amount after paying income taxes and brokerage fees is not necessarily the right decision. Choosing the right stock is often not an easy or simple matter. If the company as far as dividend yield is concerned is a good company, then the investor has chosen wisely. Therefore, he usually takes less risk by having highly qualified management make additional investments from retained earnings than by making the investments himself and making serious mistakes in finding Find new, equally attractive investments. The more prominent a company is concerned with the issue of whether to retain or pay dividends to shareholders, the more important this factor becomes. That's why even shareholders who don't pay taxes on their income or don't spend it realize that companies that retain profits to take advantage of new opportunities are more profitable. benefits him as well as the taxpayer.

In this case, dividends begin to play their true role. For those looking to get the highest returns from their investments, dividends will quickly lose the importance that the financial world often perceives them to have. This is true not only for investors who carefully choose growth stocks but also for those who are willing to accept high risks in order to achieve a larger return. This view sometimes points to a high dividend yield as a factor of safety. It is based on the theory that high-class stocks bring so much profit that they cannot be overpriced or undervalued. Every dividend study I have conducted has shown that the majority of stocks with negative price movements come from high dividend yield groups rather than from low dividend yield groups. If other management does well but increases the dividend, sacrificing opportunities to reinvest retained earnings, it is like the farm manager selling all his beautiful livestock as soon as possible. grow them instead of raising them until he can offer the highest price for the cost. Although he received an immediate sum of money, he had to incur a significant cost.

I just commented on a company that increased its dividend rather than a company that paid all dividends. I also know that although a non-professional investor may not need any income, almost everyone does. Only in a few limited cases, when the growth opportunity is so great that the management of reputable companies does not have enough money to pay a portion of their earnings to shareholders, they instead take advantage of the growth opportunity. through retaining profits and performing high-level financial activities. Investors should base on their needs to decide how much money to invest in a company with unusual development factors without guaranteed dividends. However, the most important thing is that people do not buy stocks in companies that tend to pay high dividends because it will limit growth potential.

This brings us to the most important aspect of dividends that few people pay attention to. That is regularity and reliability. A smart investor will plan and predict what can be done with his income. Although he is not interested in a short-term increase in income, he wants to avoid a decrease in income, so his plan is at risk of bankruptcy. Furthermore, he wants to decide for himself between a company that reinvests most or all of its retained earnings or a company that grows at a steady but slower rate and only needs to reinvest a portion of its retained earnings. smaller money.

For the above reasons, those who make wise policies regarding the relationship with shareholders and investors who desire a higher P/E per share based on that policy often avoid unclear ways of thinking. (a typical example of that way of thinking is the company's treasurer or deputy chief financial officer). They set dividend regulations and have no intention of changing them, then announce the dividend policy to shareholders. Dividends may change significantly but there will be no change in policy or regulation.

This policy is based on the percentage of income that needs to be retained to achieve the highest growth. Young and fast-growing companies often do not pay dividends for many years, only when their assets reach a much larger depreciation level do they pay shareholders 25-40%. profit. For more established companies, shareholder payouts will vary from company to company. However, the percentage will not determine the exact amount the company will pay; This causes dividends to vary from year to year. This is also something that shareholders do not want because it makes them unable to independently plan for the long term. What they want is a fixed amount based on a percentage and regular payments on a quarterly, semi-annual or annual basis depending on the case. As income increases, the payment amount will increase to reach the previously determined percentage. However, this is only possible when:

a) there are other funds available that the management department has not yet used to be ready to receive new development opportunities and;

b) there is reason to believe that the new rate will be maintained long term from now on, after taking into account the possibility of business downturn and new development opportunities.

Management sets a dividend policy that is widely accepted by informed investors, including those who firmly believe that the utmost care should be taken when increasing dividends and only in cases where there is a clear possibility of sustainability. maintain that ratio. Likewise, only reduce dividends in the worst-case scenario. Surprisingly, many corporate finance experts agree to pay the increased dividend in one go. They do this even when the unexpected dividend increases have no lasting impact on the stock market price, which also demonstrates the degree of contradiction between the above policy and the desires of investors. long-term.

Whether the dividend policy is reasonable or absurd, as long as it consistently pursues the policy, the company will find investors who like its unique policy. Regardless of whether it provides optimal returns or not, many investors still expect high dividend yields. Some shareholders want rates to stay low. Others don't expect anything at all. Some prefer low rates along with a small, steady annual dividend. Others do not expect dividends from stocks but prefer lower yields. If management chooses one of these policies combined with actual needs, it will create a group of shareholders who favor and want the company to continue applying that policy. A smart management apparatus that wants to have a reputation for investing in stocks will respect investors' preferences for pursuing policies.

Planning a dividend policy is a bit like planning to open a restaurant. The owner of a good restaurant can do well with high service prices. He can also operate effectively in an attractive location, selling the best food at the lowest prices; or success with Hungarian, Chinese, Italian dishes. Each method will attract a certain number of customers. Everyone will come and wait for a delicious meal. However, with limited capacity, he cannot build a steady stream of customers if the first day serves the most expensive meal, the second day serves the lowest priced meal, and the next day only serves foreign taste meals without prior notice. Companies that constantly change their dividend policies cannot succeed in retaining loyal shareholders. Its shares do not make for long-term investments.

If the dividend policy is unified, creating conditions for investors to plan for the future, then all dividend issues are only a small part of the investment picture, which always causes countless problems. debate about the desirability of dividend policy. The majorities in the financial world that are at odds with each other on this issue cannot explain why the majority of stocks that have shown nothing but below-average earnings prospects over many years, in fact deliver Quite a big benefit for shareholders. Many of the above examples demonstrate these cases. Another typical investment of this type of stock is Rohm&Haas. The company's shares were first issued in 1949, when a group of investment banks bought a large block of shares held by Alien Property Custodian and resold them widely. The public sale price is $41.25. At that time, the stock paid only $1 in dividends paid in additional shares. Many investors find that with low dividends, this stock is not an attractive and secure investment. However, since the company decided to pay a dividend and increased its regular cash dividend even though revenue remained low, the price per share went up to $400. The former owner of Rohm&Haas received dividends of 4% per year from 1949 to 1955 and 3% in 1956, so his return was ten times his capital.

In fact, I think you should not pay too much attention to dividends when choosing value stocks. The strangest thing is that those who care least about dividends earn the most dividends. It is also important to recall that after a period of five to ten years, the largest dividends that can be achieved do not come from stocks of companies with high dividend rates. USUALLY from companies with fairly low dividend rates. Highly qualified management teams can conduct businesses that generate significant profits while pursuing a policy of paying out only a small percentage of income, but the actual amount received is far greater than the amount paid. We can get back from shares with high dividend rates. So why won't this reasonable and logical trend continue in the future?

8. Five things investors should avoid

1. You should not buy stocks in companies that are in the process of formation and development

The core issue for successful investing is finding companies that are developing new products, new processes or looking for new markets. Companies often target these goals. Many companies are founded just to develop a unique invention. Many companies go into areas with great growth potential such as electronics. A large number of other companies were founded to find minerals or other natural resources—an area where the rewards for success are significant. For the above reasons, newly established companies do not yet make a profit when first operating, but at first glance people feel it is worth investing.

There is a theory that attracts a lot of attention. Why don't we buy the first shares when the company goes public to have the opportunity to become the main shareholder of the company? Successful businesses sometimes sell shares at the same price as when they first went public. Therefore, why do we have to wait and let others take that opportunity away? Why not use the research and evaluation methods used in finding established companies to find reputable new companies that are growing?

From an investment standpoint, I see a fundamental difference between a company that has not gone through two or three years of commercialization and one year of profitable operations and a company that is stable, even profitable. may just be a small company with annual sales of no more than one million dollars. In established companies, all major functions of the business are in place. Investors can observe the production line, revenue, expenses, management team and all other aspects of the operation. Perhaps more importantly, he can find valuable insights from highly qualified observers who regularly review and weigh the company's strengths and weaknesses. On the contrary, when a company is in the process of formation and development, all that investors or anyone else can do is plan and predict the company's difficulties and advantages. This is a much more complicated issue than what needs to be done at a company that has been in business for a long time. The risk of errors may arise in the process of drawing conclusions.

It's actually a very difficult thing to do. No matter how good an investor is, it is impossible to provide a general standard for selecting valuable companies, because proper evaluation can only be applied to organizations that have been in operation. repertoires. Often, young companies have a few individuals with leadership talent at a certain stage in the business cycle, but they lack knowledge in many equally important areas. They may be great salespeople but lack other business abilities. Often, investors or manufacturers may not know that even the best quality products require as good marketing as production. Investors rarely convince organizations that they lack those skills. And they don't even bother to tell those organizations where they can find those skills.

For these reasons, no matter how attractive a growing company may appear, its finances should be evaluated by experts who have a qualified management team to fix them. shortcomings that companies in the process of formation have not yet noticed. Those who do not have good expertise and do not want to convince the new management team of the need to take advantage of such help will feel severely disappointed when investing in companies that do not have a track record. There are many great opportunities in established companies, so ordinary investors should remember the rule to never buy shares in new companies that are still in