M&g Share Discussion Threads

[anhar] 10/9/2021 13:26

...I was just curious adding it up on paper how long it would take me to make 1 million in an ISA with the 20k added every year and the compound dividends at today's rates and how much different it would make on doubling the value of the existing stock but cutting the dividend in half if I did not trade it...

It would take about 19 years to reach £1m by investing £20,000pa at 9%pa.

Not sure what exactly the second part of your question means but if it's an initial £40,000, plus £20,000 added per year after that at half the above rate, 4.5%pa, the answer is about 24 years.

All highly theoretical because shares just don't work out as neatly as that. There are just too many unknown events that can happen which cannot be taken into account when looking so far ahead.

And as Woodhawk points out, these are just absolute figures. The real values are anyone's guess but very likely to be a great deal less than today's worth.

[spud] 10/9/2021 12:54

Happy to be slowly accumulating here.

spud

[spawny100] 10/9/2021 12:50

I'd never heard of it either. Thanks woodhawk. Useful.

[woodhawk] 10/9/2021 12:47

It is the "Rule of 72". In any instance, you divide 72 by whatever the yield is, to see how long it takes to double your investment at that constant rate. So if you had a constant yield of, say, 6% then 72/ 6 = 12 years to double your investment (with all divis reinvested).

[karv1] 10/9/2021 12:27

Thanks, WOOD to be honest I never heard of the 72/9 rule, I was just curious adding it up on paper how long it would take me to make 1 million in an ISA with the 20k added every year and the compound dividends at today's rates and how much different it would make on doubling the value of the existing stock but cutting the dividend in half if I did not trade it.
It would add years to the 1m ISA target, then you have to take into account different types of taxes, etc it has made me look at it all slightly differently.

[woodhawk] 10/9/2021 11:48

karv1,

Yes, that is one route. Remember the rule of 72! 72 / 9 = your investment doubles in 8 years (without any capital growth or trading profits).

[karv1] 10/9/2021 11:03

Following the Isa millionaire chat, If you are a long term investor and not a trader and If your goal was to get the ISA million ASAP you not really going to want the share price to go up any time soon because it will slow your goal down by years depending many years you already have saved ideally you want to keep 200 share price and the 9%+ dividend and hope the dividend grows but the share price does not.

[mister md] 09/9/2021 13:32

well, doubled down on my holding today, in the hope that this will be a big dividend payer for years to come. Bought the first lot at 124p in May last year, so fortunately still have a low average price here.

[anhar] 09/9/2021 12:29

Divi cut not especially likely in my view, I wouldn't have invested if I thought it was. In fact they raised the interim to 6.1p from 6.0p. It's just that EHY shares in general can be trouble though MNG looks to me like the exception. But what do I know?

[karv1] 09/9/2021 12:24

Always learning.
I hope or suspect MNG will either raise their dividend by a small amount or stay stable over the next few years, with possible big share buybacks once the pot is big enough to cover the debt.
I was reading some of the 2019 results the other days on 1 of the charts www.mandgplc.com/~/media/Files/M/MandG-Plc/documents/investors/results-reports-and-presentations/2019/m-and-g-plc-investor-and-analyst-conference-19-09-26.pdf
....................page 58 the graph shows the underlying capital generation paying less out per year until 2032 when it spikes up above from what we getting now and declines again and will cover all debt and interest ending in 2042. Does this equal to many many billions possible 10+ billion over the next 20 years.
If you take into account the self-generating funds already generated in such a small amount of time. or am I just reading a small section out of context and misunderstanding?

[peterbill] 09/9/2021 12:00

Thanks Whatja ... like karv1, I will need google assitance to decipher your explanation. I'll do that when we get back from our trip to the Outer Hebrides ... hopefully the ferries are running on time.
Regarding the divi ... last years generous one was covered about 3.5 times by earnings ... This years earnings have not been declared yet, but likely to be less ... Is a dividend cut likely? ... you have to ask yourself.

[anhar] 09/9/2021 11:35

The difficulty is, as I mentioned yesterday, is how to tell the difference between EHYs heading for trouble and the genuine yield bargains.

You say that you reject many EHYs as having unsustainable divis, which I think supports my view that the majority of EHY shares become divi cutters with othe problems too. I also try to analyse out those whose divis appear unsustainable but as you say, that's an opinion which can go wrong. No amount of analysis can discover company problems which are as yet unknown by us small investors.

I'm not saying this is the case for MNG, I've decided it is the exception and have invested in it for my income port but it would not come as a huge surprise if MNG divis were cut, as the current yield, driven even higher by the recent price fall, is in the "if something is too good to be true" category for a big cap like this. As the saying continues, "it usually is", but therefore not every time.

[fenners66] 09/9/2021 11:08

Cheers Aleman - if only we could have kept the 14% for a years instead of taking the 30% (was it ?) premium

anhar - I have been reviewing high yielders for a long time too.
Fortunately (?) I have done some research on each of them and have rejected many as in my opinion the dividend was unsustainable.

Where I believed it was sustainable the majority have proved to be bargains, or at least maintained their income generation without capital erosion.

My example of BRE was more pertinent because it was well known company , but new to the market , also in financial services, and paying a very high dividend.

If anyone knows of a closer analogy , I would like to run the rule over that one too.

[aleman] 09/9/2021 10:50

fenners66
8 Sep '21 - 20:24 - 1000 of 1003

As far as hi-yields being the forerunner to a dividend cut, there was a similar example of an existing well known company coming to the market at about a 14% yield.

Brittania if I remember the name correctly,
Unfortunately it was not on the market for long before it was snapped up ...

I think we had this before on this thread and I think it was BRIT Insurance (BRE)

[anhar] 09/9/2021 10:22

fenners66: As far as hi-yields being the forerunner to a dividend cut, there was a similar example of an existing well known company coming to the market at about a 14% yield.

Brittania if I remember the name correctly,
Unfortunately it was not on the market for long before it was snapped up ...

If that is a negative response to my earlier comment about extreme high yielders then one example doesn't really cut it. I never said that this is always an indication of a problem or divi cut, I deliberately said it "often" is and I stand by that, having been investing for several decades with an emphasis on income and high yielders. I also pointed out that sometimes it shows a "screaming bargain".

A single case as you state does not prove or disprove anything, you'd need to look at what happened to a large number of EHYs over time to establish this. My experience is anecdotal I admit but with some basis in very lengthy experience with HY shares and I long ago concluded that with EHYs the screaming bargains were very much a minority compared with those that went on to have problems and divi cuts.

As I said, for MNG I bought in a while ago having decided that it falls more into the screamer group but I think it worth pointing out that EHY too often indicates future problems - but not always.

[karv1] 09/9/2021 07:54

Thanks, whatja I think I will need to read this a few times with googles help but I get the general meaning after I get back from the school run.
On a side note, today looks like it going to be another bad day on the markets.

[whatja] 08/9/2021 22:27

Karv1 and Peterbill
The main balance sheet hedging done by MNG is to reduce the volatility inthe capital asset that is the present value of future shareholder transfers from the WP fund.
The PVSHT asset is a discounted value of annual payments of about 230-250m which is valued at around 2bn.
The PVST depends on investment returns from a high equity content in the fund. By hedging some of the risk that the SHT is lower than expected they get a more stable PVSHT value and more capital.
I think it is The accounting treatment that creates the large IFRS effects as the hedge is marked to market and goes through the P&L, but the Asset change is a movement in reserves and goes through a balance sheet adjustment.

What is important is the capital stability reflected in the solvency capital ratio.

[fenners66] 08/9/2021 20:24

As far as hi-yields being the forerunner to a dividend cut, there was a similar example of an existing well known company coming to the market at about a 14% yield.

Brittania if I remember the name correctly,
Unfortunately it was not on the market for long before it was snapped up ...

[gaffer73] 08/9/2021 18:38

No mention of a change in tax on ISA's, not yet anyway.

[woodhawk] 08/9/2021 18:22

Clearly the answer to that is that nobody knows.As the saying goes, the only things guaranteed in this life are death and taxes.

[spawny100] 08/9/2021 18:19

I was simply asking a perfectly reasonable and honest question as to just how bulletproof the isa tax free wrapper is. That is all.

[woodhawk] 08/9/2021 17:02

You can speculate on what might possibly happen (or not) as regards Shares ISAs ad nauseam. In the meantime, I'm content to use the wrapper to my fullest advantage while it exists. I'm not yet a Shares ISA Millionaire (apparently there are over 700 on iii and were almost 600 at Hargreaves Lansdown earlier this year), but it is not out of reach on my likely investment horizon. Personally, I don't see much tax efficient alternative apart from a SIPP - although I prefer the ultimate freedom of the Shares ISA.

[spawny100] 08/9/2021 16:54

I disagree. I think the chance would definitely not be zero.

[williamcooper104] 08/9/2021 16:25

You'd have zero chance going to court on mis-selling given that the government could simply change the laws to exclude themselves from any liability I don't think they'll blanket remove the tax advantages But I can see them being means tested/limited in some way Eg can only get tax benefits on a few hundred thousand and/or no tax benefits if you are deemed to be already wealthy At some point we will get a Labour government which will keep all the Tory tax rises and start attacking wealth via the tax ststemm