So if I read you correctly, what you are, in essence, saying is that rather than lend K money at between 1.74% and 2.87% yield, you should rather get them to pay you 3.87% yield from their Dividend.
There could also be another way to look at this over, say, a 5 year period in terms of Capital Gain, or Loss.
If we look at what K's price was 5 years ago we see it at around $85/share. It's now around $59.20/share.
So based on Annual Compounding, we have :-
59.20 = 85(1+r/100)^5
(59.2/85)^0.2 = 1+r/100
r = ((0.93) - 1) x 100
r = -7%.
So one would have lost money on one's Investment in K at an annual compounded rate of -7% while getting a Dividend return of +3.87%.
Do you see that as a good investment ?
The way I see it, companies that are reflecting far better business performances from within their Financials, especially within their Income Statements, will be more attractive as investments. And that will transpose into their share price's performance ..... Plus they will also, generally, pay a dividend as well.
Three examples :-
AMAT. 5 Year Compounded Gain of :- 86 = 15(1+r/100)^5 gives r = 41% compounded per annum.
PAYC. 5 Year Compounded Gain of :- 452 = 40(1+r/100)^5 gives r = 62% compounded per annum.
TER. 5 Year Compounded Gain of :- 119 = 20(1+r/100)^5 gives r = 43% compounded per annum.
The percentage target ratios that I use are derived, primarily, from what Warren Buffett uses, although I have reduced them slightly for my own purposes as he looks for companies that very much have Durable Competitive Advantage, and they are not that common in their "purest" form. |
