emmanuelewumi:



Your N100 million property generates N10 million rental income, ie PE of 10. But the Real estate investor ploughs back 50% of his rental earnings into the expansion of his real estate investment, meaning the investor spends just N5 million from the N100 million property earnings of N10 million.

Companies have dividend policy, real estate investors also have dividend policy.

The earnings not paid out but ploughed back into the business is still part of the return on investment, which over time will increase the equity of shareholders funds of the investment, if properly managed an investment with a growing equity ought to increase earnings on the long run.

Anyway sha, wetin I Sabi def?

There are somethings, that can't be explained on how small businesses or investments turn into big businesses or investments.

Real life story a group of 10 beggars at Oshodi bought a property on Oshodi road, just demolished to build a 3 storey shopping complex. These currently have 4 of such investments at Oshodi, Agege and Ogba.

Accountants in the house, please explain Internal Rate of Returns to a lay man like me.

Bros, this thing na common sense na.

You have a property you kept in trust with an agency/institution. The institution makes 15m out of the 100m property. As agreed, they give you 10m. This 10m is your income and this will have a yield of 10%.

But the PE of that investment is 100/15= 6.7

You may have agreed with them to use their own part to renovate, fix and still take their charges and give you your balance and they will do these.

From your own example, you get 10m out if 100m. PE is 10. If you use 5m to fix the house and expand, then you are left with 5m. Your yield is just 5/100= 5%.

Read about PE well. It is only when EPS= Dividend that PE= inverse of DY = timeframe ( if and only if Price, EPS, Dividend remains the same for the timeframe).

Na common sense arithmetic.

fxuser:

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Link:
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Chk out Nbrew daily and see if u can spot the kumo breakout developing

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emmanuelewumi:




Make we no argue further , my earnings are part of the returns on my investment your own dividend is the return on your investment.

I think that is okay.

What is your earnings? A company earning or your dividend? You can't call a company earning your earning. Because out of the company earnings they give shareholders a part of it called dividend. The company will calculate their ROI to be PAT/shareholders funds or EPS/book value.

For you, will you calculate your ROI as the company PAT/ Emma's invested amount.

The answer is a big No. Because there is distortion!!

You are not paid the company earning. You are paid something called dividend which will be divided by the amount you invested and that is your ROI.

RabbiDoracle:


What is your earnings? A company earning or your dividend? You can't call a company earning your earning. Because out of the company earnings they give shareholders a part of it called dividend. The company will calculate their ROI to be PAT/shareholders funds or EPS/book value.

For you, will you calculate your ROI as the company PAT/ Emma's invested amount.

The answer is a big No. Because there is distortion!!

You are not paid the company earning. You are paid something called dividend which will be divided by the amount you invested and that is your ROI.

Oya read am here, oyibo don write am. If a black man explains, you will not understand. You will wait for oyibo to come and explain it. Oya see am here written verbatim.

I

RabbiDoracle:


Bros, this thing na common sense na.

You have a property you kept in trust with an agency/institution. The institution makes 15m out of the 100m property. As agreed, they give you 10m. This 10m is your income and this will have a yield of 10%.

But the PE of that investment is 100/15= 6.7

You may have agreed with them to use their own part to renovate, fix and still take their charges and give you your balance and they will do these.

From your own example, you get 10m out if 100m. PE is 10. If you use 5m to fix the house and expand, then you are left with 5m. Your yield is just 5/100= 5%.

Read about PE well. It is only when EPS= Dividend that PE= inverse of DY = timeframe ( if and only if Price, EPS, Dividend remains the same for the timeframe).

Na common sense arithmetic.

There difference between the real estate income, earnings and dividends.

I am talking of a real estate of N100 million, with earnings of N10 million after deducting tax, professional fees and rental expenses.

There is no smart real estate investor that will assume that the net of N10 million is his dividend. They usually plough back the earnings and also leverage to increase their real estate portfolio.

As earlier said, let us stick to what we think and assume in determining our returns on investments.

There is no better gauge than DY or price appreciation.
Small equity holders will only attend AGM and chop all the food. Large equity holders will depend on these two mentioned above.

The third group are those who get a seat at the board and enjoy the AGM meals and gifts, DY, price appreciation and some annual payments as directors of the firm.

Wetin remain.

emmanuelewumi:
I


There difference between the real estate income, earnings and dividends.

I am talking of a real estate of N100 million, with earnings of N10 million after deducting tax, professional fees and rental income.

There is no smart real estate investor that will assume that the net of N10 million is his dividend. They usually plough back the earnings and also leverage to increase their real estate portfolio.

As earlier said, let us stick to what we think and assume in determining our returns on investments.

That I agree.

You wrote" they usually", what if they don't? What if they just want to stick to just that house and not expand. What if there is not issue with the house that requires ploughing back?

You are making an assumption and I'm also making an assumption.

Hope you no dey vex?

Se oti jeun?

Retained earning help the company grow, while dividend payment help the shareholders get returns on their investment, and it's the major reason investors invest.

If company keep retaining 100% of their investment over the years without dividend payment, that company need to be question.

What if they keep retaining and something goes wrong with that company, and their value drop drastically? The investor at this point has nothing to fall back on.

In fact NSE, should make rule that will mandate companies to pay at least certain percent of their quoted annual EPS to their shareholders, every year.

Some companies might manipulate their result by declaring fake high EPS. Then tell me what they are retaining, while some will retain, and uses it for their personal business outside that of company own business.

The truth still remains that, what you eat, is only what you gain

Chibuking81:
Retained earning help the company grow, while dividend payment help the shareholders get returns on their investment, and it's the major reason investors invest.

If company keep retaining 100% of their investment over the years without dividend payment, that company need to be question.

What if they keep retaining and something goes wrong with that company, and their value drop drastically? The investor at this point has nothing to fall back on.

In fact NSE, should make rule that will mandate companies to pay at least certain percent of their quoted annual EPS to their shareholders, every year.

Some companies might manipulate their result by declaring fake high EPS. Then tell me what they are retaining, while some will retain, and uses it for their personal business outside that of company own business.

The truth still remains that, what you eat, is only what you gain

Thank you sir.

You hit the nail on the head.

Chibuking81:
Retained earning help the company grow, while dividend payment help the shareholders get returns on their investment, and it's the major reason investors invest.

If company keep retaining 100% of their investment over the years without dividend payment, that company need to be question.

What if they keep retaining and something goes wrong with that company, and their value drop drastically? The investor at this point has nothing to fall back on.

In fact NSE, should make rule that will mandate companies to pay at least certain percent of their quoted annual EPS to their shareholders, every year.

Some companies might manipulate their result by declaring fake high EPS. Then tell me what they are retaining, while some will retain, and uses it for their personal business outside that of company own business.

The truth still remains that, what you eat, is only what you gain

Amazon paid no diviend for how many years? Yet their share price is through the roof

RabbiDoracle:


That I agree.

You wrote" they usually", what if they don't? What if they just want to stick to just that house and not expand. What if there is not issue with the house that requires ploughing back?

You are making an assumption and I'm also making an assumption.

Hope you no dey vex?

Se oti jeun?

Which of the following will make more money in 5 years or double in value.




1. Treasury Bills will an interest of 15%

2. A stock with a dividend payment policy of 50% of the earnings, which currently gives a dividend yield of 10%.


As earlier said somethings can't be explained on how small businesses or investments turn to big businesses or investments within 10 years or thereabout.

No wonder Lagos state government tax auditors find it difficult believing some entrepreneurs or investors whenever they make their annual tax returns.

shigidi:


Amazon paid no diviend for how many years? Yet their share price is through the roof

That is why I said somethings can't be explained, retained earnings, ploughing back into the business with sensible leverage works like steroids in the growth of a business.

@RabbiDoracle:

A low P/E can indicate either that a company may currently be undervalued or that the company is
doing exceptionally well relative to its past
trends.

https://www.investopedia.com/terms/p/price-earningsratio.asp

i used it for FAIR VALUE determination .. Not timeframe

i meant dividends by "earnings" in my post.

You know the technical name. I was thought the easy way.

i see a lot of people asking for fair value calculation like its rocket science.. So i chose to share my simple method.

take or leave it.

Oti-to

shigidi:


Amazon paid no diviend for how many years? Yet their share price is through the roof

If Amazon maintains above the roof level at a particular amount for 5 years, without payment of dividend, what will be the gain of an investor who joined them last 3 years and whose money invested in same business remain same without dividend, for three years?

Or, are you of the opinion that dividend should be abolish in the place of capital appreciation?.

Assuming that the same Amazon face the challenges that FBNH encountered for some years before recovering, what will their investors fall back on, as most of FBNH fall back on their dividend during their challenged years.

From my own view, if there is law that will mandate companies to pay at least 40 percent of their EPS to their investors, it will be the best, it will not stop them to go through the roof.

Both dividend, bonus and capital appreciation are good for investors, and should go together.

Earnings belong to shareholders and not company. That is why profit is a liability to a company and not asset. For business expansion and growth, management prefers to retain a percentage of the earnings and pay out the rest as dividend. The retained earnings is used to then create value for shareholders to increase the worth of their investment. This is what is called Internal Rate of Return (IRR). Put differently, IRR is the return in excess of company's WACC (weighted average cost of capital). IRR of pure equity financed company is usually lower than that of a debt finance one. Thus, return on investment is both dividend and capital gain (arising from undistributed profits)..

I have avidly followed this discussion and I kept smiling....
One person is treating the subject from the classroom, the other is dealing with the street...

RealityShot:
@RabbiDoracle:

A low P/E can indicate either that a company may currently be undervalued or that the company is
doing exceptionally well relative to its past
trends.

https://www.investopedia.com/terms/p/price-earningsratio.asp

i used it for FAIR VALUE determination .. Not timeframe

i meant dividends by "earnings" in my post.

You know the technical name. I was thought the easy way.

i see a lot of people asking for fair value calculation like its rocket science.. So i chose to share my simple method.

take or leave it.

Oti-to

On NSE, a low p/e normally indicate a company is on life support....
It infact estimates the remaining years for the management to finally finish milking it.....

I only started making money on NSE when I blacklisted ALL listed companies!
Having it at the back of my mind that NONE of them cares about me freed my mind to face the game like a war.
They retain big profits, before you know, they are back here requesting for you to bail them out by issuing more shares in rights issues.
Diluting you every now and then...

DeRuggedProf:


On NSE, a low p/e normally indicate a company is on life support....
It intact estimates the remaining year for the management to finally finish milking it.....

Like we dey jump up those days on top NEM

DeRuggedProf:
I only started making money on NSE when I blacklisted ALL listed companies!

I was fortunate the first heavy investment I made (with virtually no knowledge) was Guaranty otherwise I for don return to village long ago

Agbalowomeri:


Like we dey jump up those days on top NEM

I stopped short of calling their names.....
Low p/e can remain low for decades until the 1K rule resets it....

DeRuggedProf:


On NSE, a low p/e normally indicate a company is on life support....
It intact estimates the remaining year for the management to finally finish milking it.....

do you think that foreign investors will use your standard or their international standards for their stock picks?

in the first week of this january, there was a tip here to buy Fidelity bank, do you know what its P/e was then and what it is now that it is slowing down?

when you see a new idea.. Try it before you shoot the messenger.

only sentiment makes investors ignore P/e. Is sentiment the best tool for investing in your opinion?

ANYWAYS, I AM NO GURU.
I WAS JUST SHARING MY FAIR VALUE STYLE.. may be its a bomb..in the Nig.SE

Thanks for making me know that much..

sleep mode re-activated.

DeRuggedProf:


On NSE, a low p/e normally indicate a company is on life support....
It intact estimates the remaining year for the management to finally finish milking it.....

Oga does that mean you didn't buy UBA and Access Bank, when their PE was less than 3.

DeRuggedProf:


I stopped short of calling their names.....
Low p/e can remain low for decades until the 1K rule resets it....

You look at the low PE in comparison with the likely dividend yield.

RealityShot:
do you think that foreign investors will use your standard or their international standards for their stock picks?

in first week if this january, there was a tip here to buy Fidelity bank, do you know what its P/e was then and what it is now that is slowing down?

when you see a new idea.. Try it before you shoot the messenger.

only sentiment makes investors ignore P/e. Is sentiment the best tool for investing in your opinion?

So p/e has just been invented?

Disclosure: p/e is the best trap on NSE......

emmanuelewumi:


You look at the low PE in comparison with the likely dividend yield.

GBAM!!!
....likely dividend to be paid for companies that pay....
Such opportunities that come sparingly in bear times. Like when Zenith descended to N9.

DeRuggedProf:
I only started making money on NSE when I blacklisted ALL listed companies!
Having it at the back of my mind that NONE of them cares about me freed my mind to face the game like a war.
They retain big profits, before you know, they are back here requesting for you to bail them out by issuing more shares in rights issues.
Diluting you every now and then...

Interesting, you really made a good point.
That's why am advocating for the law that will mandate them to pay from their declared EPS, minimum of 40% and maximum as they agreed to their investors, by so doing, we shall know the really earning of the companies. That will make the companies to come clean with their really earning per a share, per annum.
It will go a long way to bring sanity to the market, and place the companies where the belong, according to their value.

RabbiDoracle:


Depending on how much you bought. If you bought 10 unit of a stock at N50 ( total amount invested will be N500), and they don't pay dividends, all you need to do is just to attend their AGM. At the AGM, they will give you food worth more than N500 and some corporate gifts. That is how you will recoup your investment faster.

For those that have heavy units, they will just sit it out and wait for capital appreciation.

Lol!!!! God pass Devil!

RealityShot:
The one Attribute Indicator.

P/E ratio.

this means Price divided by earnings ratio.

it tells you how long it will take to earn 100% profit or at least get your money back at the current price and earning rates.

it is used to determine "fair value" very easily.

How?

simple divide the price by the earnings. What you get is the Return of Investment time.

if you like it, then thats the stocks fair value to you.

(NOTE: what is fair to you may not be same for another.)

if you think its quite or too low;
then multiply the earnings by the timeframe (years) you think is fair.
The result is the fair value.

example: a stock's price is 10N; earnings is 1N. P/E ratio is 10. That means 10 yrs to full RoI.

that might be unfair. Perhaps you think 5 yrs is better RoI period.
Then you multiply earnings 1N by 5yrs..ans 5N. Thats the fair value.

this is easy P/E ratio fair value estimation.

DD advised.
P.S: the market does pricing due to demand & supply; fair value just helps u check your greed

I saw time frame here. So I corrected that misconception that we make.

RealityShot:
@RabbiDoracle:

A low P/E can indicate either that a company may currently be undervalued or that the company is
doing exceptionally well relative to its past
trends.

https://www.investopedia.com/terms/p/price-earningsratio.asp

i used it for FAIR VALUE determination .. Not timeframe

i meant dividends by "earnings" in my post.

You know the technical name. I was thought the easy way.

i see a lot of people asking for fair value calculation like its rocket science.. So i chose to share my simple method.

take or leave it.

Oti-to

If you meant Dividend as "earning" in the post above, then you are bluntly right.

Same school of thought. Sorry for my misunderstanding your post.

shigidi:


Amazon paid no diviend for how many years? Yet their share price is through the roof

So your point? Does it mean that dividend isn't a way of measuring shareholders' Return on their investments.

Like we mentioned, there is also capital appreciation as well.

emmanuelewumi:


Which of the following will make more money in 5 years or double in value.




1. Treasury Bills will an interest of 15%

2. A stock with a dividend payment policy of 50% of the earnings, which currently gives a dividend yield of 10%.


As earlier said somethings can't be explained on how small businesses or investments turn to big businesses or investments within 10 years or thereabout.

No wonder Lagos state government tax auditors find it difficult believing some entrepreneurs or investors whenever they make their annual tax returns.

How can you know why will happen in 5 years? The future is uncertain.

For now number 1 is the surest way because the country is sovereign and would not want to default of her debts.

However if the future is certain, you know me, I will plant bottle in the stock and wait it out for even 10 years.

currentprice:


jejebaba,,, you can develop the way you price stock from here. it not same as BVPS
https://www.gurufocus.com/news/171624/methods-for-arriving-at-the-fair-value-of-companies

found this..

hmm.. By the time you finish reading that page you will be more inclined to ask others for fair value! Kikikiki