Latest / The Money Puzzle / Disappearing dividends - The hidden problem in our hot share market

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Disappearing dividends - The hidden problem in our hot share market · The Money Puzzle

• 0:00
  Speaker 1: Well, we're very active managers, so we don't just sit
• 0:03
  Speaker 1: in Commonwealth Bank all year and get 3.5% cash yield.
• 0:07
  Speaker 1: That's not great, as you said. I mean, what we
• 0:10
  Speaker 1: do is actively trade our strategy to maybe get Commonwealth
• 0:14
  Speaker 1: Bank's final dividend, which was paid a couple of months
• 0:17
  Speaker 1: or so back, and then we'll potentially sell down our
• 0:20
  Speaker 1: holding and move into other stocks, paying dividends at other
• 0:23
  Speaker 1: times of the year. So we actively trade to try
• 0:27
  Speaker 1: and capture more dividends. And that way we can generate
• 0:30
  Speaker 1: a lot higher income than the market, because as you've said,
• 0:33
  Speaker 1: the market's income now is pretty lousy. The reality is
• 0:37
  Speaker 1: there's only so much you can do that. The market yields, well,
• 0:42
  Speaker 1: cash yields actually, our latest numbers are 3.7%. We can
• 0:46
  Speaker 1: get a couple of percent more by doing this rotation,
• 0:49
  Speaker 1: but there is a limit to how much you can get.
• 0:51
  Speaker 1: And the reality is we beholden to the amount of
• 0:54
  Speaker 1: dividends that are being paid and We'd certainly like dividends
• 0:57
  Speaker 1: to increase, but for dividends to increase, earnings need to
• 1:01
  Speaker 1: increase because that's how companies can pay dividends. And for
• 1:05
  Speaker 1: that to happen, we need to see the economy being stronger.
• 1:08
  Speaker 1: And hopefully we will see rates falling fairly soon. And
• 1:12
  Speaker 1: hopefully the economy will start to get back to a
• 1:15
  Speaker 1: normal pace of growth and companies can expand their earnings.
• 1:18
  Speaker 2: Have you seen any, and I doubt the banks are
• 1:21
  Speaker 2: in this group, but are you aware of any stocks
• 1:25
  Speaker 2: that fit that description that the yield is healthy as
• 1:30
  Speaker 2: good as anyone else but their forecast their compound annual
• 1:34
  Speaker 2: growth forecasts are at the level you'd like to see
• 1:37
  Speaker 2: the whole market are there companies that are outstanding there
• 1:40
  Speaker 2: we don't like to give too many stock chips I
• 1:44
  Speaker 2: don't mean this is like on the public record I
• 1:47
  Speaker 2: mean I'm thinking of someone I saw a piece recently
• 1:49
  Speaker 2: where someone looked at the whole top 50 on an
• 1:52
  Speaker 2: income basis and who would grow and they found three
• 1:56
  Speaker 2: three that matched their criteria for income growth. I mean,
• 2:01
  Speaker 2: is it that grim?
• 2:03
  Speaker 1: Look, it's pretty tough out there because the bank's earnings
• 2:06
  Speaker 1: are pretty flat, albeit they have low bad debts. So
• 2:09
  Speaker 1: people were worried they were going to have a collapse
• 2:11
  Speaker 1: in earnings, but their earnings are still fairly strong at
• 2:14
  Speaker 1: strong high levels, but they're not growing substantially. Resource stocks,
• 2:19
  Speaker 1: most commodity prices are down, but I would say one
• 2:21
  Speaker 1: of the bright areas there, I'm not going to name stocks,
• 2:24
  Speaker 1: but Gold prices have held up very well and we
• 2:27
  Speaker 1: saw some very large increases in dividends, albeit from fairly
• 2:31
  Speaker 1: small levels in gold stocks.
• 2:34
  Speaker 2: Right.
• 2:35
  Speaker 1: And an area that a year or two back was
• 2:38
  Speaker 1: struggling was the utilities, but the likes of AGL and Origin,
• 2:42
  Speaker 1: the prices are growing, they're starting to make more money.
• 2:45
  Speaker 1: And we've liked the insurance for the last couple of years,
• 2:47
  Speaker 1: but it's probably getting towards the end of the insurance cycle.
• 2:51
  Speaker 1: But I'm sure your listeners all know the insurers have
• 2:54
  Speaker 1: been jacking up their prices and insurance premiums have been growing. Well,
• 2:57
  Speaker 1: one way to hedge that is to be an investor
• 3:00
  Speaker 1: in an insurance company.
• 3:01
  Speaker 2: Right. Okay. Just before we go to the break, can
• 3:04
  Speaker 2: I ask you about the banks? Everyone got it wrong, right?
• 3:09
  Speaker 2: Almost everyone. And I did some coverage on this and
• 3:13
  Speaker 2: maybe I was lucky, but I remember thinking, I actually
• 3:16
  Speaker 2: did a piece one night, one weekend and said, I've
• 3:18
  Speaker 2: just seen yet another one of these stockbroker notes, sell
• 3:20
  Speaker 2: all your banks. And I was saying to our readers,
• 3:24
  Speaker 2: don't take this, read this in context. This is an
• 3:26
  Speaker 2: institutional broker talking to institutional investors. They trade in and
• 3:30
  Speaker 2: out of banks. If you're a long-term holder of the bank,
• 3:33
  Speaker 2: be very careful about selling banks. As it turned out,
• 3:36
  Speaker 2: banks were, I mean, way better than I thought. I
• 3:38
  Speaker 2: thought that they just wouldn't fall. as these brokers had
• 3:41
  Speaker 2: suggested a few months ago. And it turned out that
• 3:44
  Speaker 2: not only did they not fall, they've been absolutely, I mean,
• 3:47
  Speaker 2: absolutely unbelievable, haven't they, really, for big four banks where
• 3:50
  Speaker 2: the business is only ticking along, really, on many fronts,
• 3:54
  Speaker 2: with the share price surging 10%, 20% in some stages
• 3:58
  Speaker 2: for big four banks. And now they're still saying sell them, which,
• 4:02
  Speaker 2: of course, you're right in the end. You're always right
• 4:05
  Speaker 2: in the end. There'll be a stock market crash someday.
• 4:07
  Speaker 2: We're all going to be right about that. We just
• 4:09
  Speaker 2: don't know when. Where do we stand now on banks?
• 4:11
  Speaker 2: Do you see them? They're so important. Do you see
• 4:15
  Speaker 2: them as appropriately priced at these levels? I'll sort of
• 4:22
  Speaker 2: say that we didn't sell all our banks.
• 4:24
  Speaker 1: That's for sure. We still see there's some pretty good
• 4:26
  Speaker 1: dividends out of them. I suppose we weren't overweight, but
• 4:29
  Speaker 1: we held a sort of index weight to the banks.
• 4:31
  Speaker 1: So we certainly didn't get sucked into the sell them
• 4:34
  Speaker 1: all because it's going to be a disaster.
• 4:35
  Speaker 2: But look, they're certainly not cheap.
• 4:37
  Speaker 1: I mean, ComBank's now on a price earnings ratio of 24,
• 4:41
  Speaker 1: a very, very low dividend yield. They're certainly not cheap,
• 4:45
  Speaker 1: but I would say that they're pretty good quality. I
• 4:48
  Speaker 1: might get myself into trouble here, but I'd call it
• 4:50
  Speaker 1: a cozy oligopoly. You've got the big four banks. There's
• 4:53
  Speaker 1: not a huge amount of competition. They're well capitalized. They
• 4:56
  Speaker 1: haven't got any bad debts. So I think that the
• 4:59
  Speaker 1: issue was, if you go back 18 months ago, there
• 5:01
  Speaker 1: was a lot of scaremongering and people, a lot of strategists.
• 5:04
  Speaker 1: And as you said, some of the institutional bank analysts
• 5:07
  Speaker 1: were very negative on banks and thought they'd have huge
• 5:10
  Speaker 1: bad debts. And it hasn't eventuated because interest rates haven't
• 5:14
  Speaker 1: risen much more. They've been pretty stable over the last
• 5:17
  Speaker 1: 12 to 18 months. House prices have generally gone up
• 5:21
  Speaker 1: or in a couple of markets have gone down a
• 5:23
  Speaker 1: little bit, but not much. And if you think about it,
• 5:25
  Speaker 1: banks are a leveraged way on Australian property because most
• 5:29
  Speaker 1: of their loans now are mortgage loans. And if the
• 5:32
  Speaker 1: Australian housing market is solid, then there won't be bad debts.
• 5:36
  Speaker 1: And that's what's happened. So And I think the outlook
• 5:38
  Speaker 1: is still pretty good for Australian property. So I think
• 5:41
  Speaker 1: the Australian bank is still pretty good, but you are
• 5:43
  Speaker 1: paying a lot for them, I suppose.
• 5:45
  Speaker 2: That is the issue. Okay, very good. We'll take a
• 5:47
  Speaker 2: short break. We'll be back in a moment. Hello, welcome
• 5:56
  Speaker 2: back to the Australian's Money Puzzle podcast. I'm James Kirby.
• 5:59
  Speaker 2: I'm talking to Dr. Don Hampson of the Plato Investment
• 6:03
  Speaker 2: Management Group. They have a variety of funds. The fund
• 6:06
  Speaker 2: in particular is That has sort of triggered the invitation,
• 6:09
  Speaker 2: if you know what I mean, for Don. It's their
• 6:11
  Speaker 2: flagship fund, which is called.
• 6:13
  Speaker 1: It's the Plato Australian Shares Income Fund.
• 6:17
  Speaker 2: Are REITs, Real Estate Investment Trusts, Property Trusts, are they included?
• 6:22
  Speaker 2: They're technically not shares there. Real Estate Trusts, are they
• 6:26
  Speaker 2: included in your basket of... Yes, they are, because they're
• 6:30
  Speaker 2: listed and pay.
• 6:32
  Speaker 1: Cash might not be called a dividend, it's called a distribution,
• 6:36
  Speaker 1: but it's still essentially cash being paid out. So yes,
• 6:39
  Speaker 1: they're in our universe and we have some of them
• 6:42
  Speaker 1: in our fund. But what they don't have generally is
• 6:46
  Speaker 1: franking credits. And one of the icing on the cake
• 6:50
  Speaker 1: of dividends from companies in Australia is you get these
• 6:55
  Speaker 1: tax credits called franking credits and they're quite valuable and
• 6:58
  Speaker 1: you don't get them with REITs.
• 7:00
  Speaker 2: So I expect the REIT, the property trust, has to
• 7:02
  Speaker 2: be better, basically, like for like than the share to
• 7:06
  Speaker 2: get into your portfolio because it doesn't have the franking.
• 7:09
  Speaker 2: How do you see REITs right now? Because they're very
• 7:12
  Speaker 2: beaten up, right? Everything went wrong. Everyone working from home,
• 7:17
  Speaker 2: the interest rates going the wrong way on them. So
• 7:20
  Speaker 2: they must be promising, are they, at the moment as
• 7:24
  Speaker 2: a sector? They're starting to look good value. That's correct.
• 7:27
  Speaker 1: But I think COVID has still changed the world. If
• 7:32
  Speaker 1: I work in the center of Sydney, you're in Melbourne
• 7:35
  Speaker 1: and the Mondays and Fridays, it's still pretty quiet in
• 7:39
  Speaker 1: Sydney and Melbourne. That whether you're a coffee shop owner
• 7:42
  Speaker 1: or you're a building owner, if you haven't got a
• 7:44
  Speaker 1: lot of customers for two out of five days, it's
• 7:48
  Speaker 1: going to be tough to make ends meet. It's going
• 7:50
  Speaker 1: to be tough to charge your coffee shop a huge rental,
• 7:53
  Speaker 1: those sorts of things. So a lot of people say
• 7:56
  Speaker 1: working from home, they're hot desking, et cetera. So a
• 7:58
  Speaker 1: lot of groups who don't have as much demand for space.
• 8:01
  Speaker 1: So that trend, like it's slowly working its way back,
• 8:05
  Speaker 1: but there's some groups are talking it up that they
• 8:07
  Speaker 1: want people in five days a week, but there's still
• 8:09
  Speaker 1: a huge number that are probably more like two to
• 8:12
  Speaker 1: three days a week. And so I think it's particularly
• 8:15
  Speaker 1: the office area is pretty soft. Some of the, in
• 8:18
  Speaker 1: the suburbs, in retail is looking better. But yeah, REITs
• 8:22
  Speaker 1: have been a fairly soft area. So one of the areas,
• 8:25
  Speaker 1: one of the companies we've liked is being Goodman Group,
• 8:28
  Speaker 1: Because they're really a developer more than anything else. But
• 8:32
  Speaker 1: they've called the cycle very well. And they're almost an
• 8:36
  Speaker 1: AI play in Australia because they're developing data centers around
• 8:39
  Speaker 1: the world and doing that very well. They've got their
• 8:41
  Speaker 1: footprints on it. Before that, they were ahead of the
• 8:44
  Speaker 1: pack building distribution centers for deliveries, et cetera. So they've
• 8:49
  Speaker 1: called it very well. And from a total return point
• 8:51
  Speaker 1: of view, it's been great. But they're not good from
• 8:53
  Speaker 1: an income point of view. Yes, absolutely.
• 8:56
  Speaker 2: Because they're so highly priced, because they've been so impressive
• 9:00
  Speaker 2: for so long. Amazing company, absolutely. Larry Goodman, Greg Goodman,
• 9:05
  Speaker 2: has managed to not just ride out all the times
• 9:08
  Speaker 2: of trouble in the property market, but it's that amazing
• 9:11
  Speaker 2: thing where he seems to be able to strategically look
• 9:14
  Speaker 2: ahead and then execute on that and get it right.
• 9:17
  Speaker 2: And if you get the strategy right, on very big companies,
• 9:20
  Speaker 2: as we all know, you can get a lot of
• 9:22
  Speaker 2: things wrong if you get the strategy right. So just
• 9:25
  Speaker 2: one last thing on the property trust, and it sounds
• 9:27
  Speaker 2: to me like you're not exactly scooping them up as
• 9:30
  Speaker 2: bargains out there. I mean, Goodman, as you say, is exceptional, really.
• 9:36
  Speaker 1: Yeah. No, we're not significantly increasing our exposure, that's for
• 9:40
  Speaker 1: sure there. And as I said, the fact that they
• 9:42
  Speaker 1: don't have franking means they're sort of unattractive from a
• 9:45
  Speaker 1: yield point of view. But it's an interesting thing is
• 9:48
  Speaker 1: that whilst our fund is called an income fund, we
• 9:50
  Speaker 1: also try and outperform. So it's not all about income.
• 9:53
  Speaker 1: And As I mentioned before, I think most people who
• 9:56
  Speaker 1: have held CBA stock are very happy with this trading
• 9:59
  Speaker 1: at $ 135. Okay, the yield's down a bit, but in
• 10:01
  Speaker 1: total return terms, you've actually done very well over the
• 10:04
  Speaker 1: last 12 months out of any of the banks, really.
• 10:07
  Speaker 1: All right.
• 10:07
  Speaker 2: Look, we'll take a break. We've got some great questions solved,
• 10:09
  Speaker 2: which are very suitable, curated especially for you. So we'll
• 10:13
  Speaker 2: be back in a moment. Hello, welcome back to the
• 10:20
  Speaker 2: Australian's Money Puzzle podcast. James Kirby here with Don Hampson
• 10:25
  Speaker 2: of the Plato Group. We're talking all things dividends and
• 10:28
  Speaker 2: income on the Australian market, which, as I say, is
• 10:32
  Speaker 2: so important on the Australian market because we have franking credits,
• 10:38
  Speaker 2: which means that your income is always better than it seems.
• 10:42
  Speaker 2: And if your bank pays 4%, in fact, it's In reality,
• 10:47
  Speaker 2: it's probably 5% or 6% to you. If you're retired,
• 10:49
  Speaker 2: it's even higher. Remember, the less tax you pay them,
• 10:52
  Speaker 2: the better they are, which was a point of great
• 10:56
  Speaker 2: contention in a recent election. But I think everyone learned
• 10:59
  Speaker 2: from that about franking credits and how they work. Now,
• 11:03
  Speaker 2: the first question is from Ranjan. And he says, I
• 11:07
  Speaker 2: like this question. There are often reports about meetings between
• 11:12
  Speaker 2: analysts and management of listed companies. And after these meetings,
• 11:16
  Speaker 2: the analysts publish their notes to their clients. The notes
• 11:20
  Speaker 2: are picked up by the media. And small investors like
• 11:24
  Speaker 2: me do not get such access. And he wonders, basically,
• 11:31
  Speaker 2: is this reflected in this share price and is the
• 11:33
  Speaker 2: whole thing fair? He also mentions the fact that he
• 11:36
  Speaker 2: does podcasts while he's ironing. I hope you've got lots
• 11:38
  Speaker 2: of ironing to do, Ranjan, because it's a half an
• 11:40
  Speaker 2: hour long podcast. I used to make out it was
• 11:43
  Speaker 2: about three minutes per shirt. That was always my rule
• 11:47
  Speaker 2: on the ironing. We were always asking people, Don, what
• 11:49
  Speaker 2: they do when they're listening, you see. So Ranjan stands out.
• 11:52
  Speaker 2: We haven't had someone say they do their ironing before.
• 11:54
  Speaker 2: Tell me about that privileged access. must be somewhere in
• 11:59
  Speaker 2: the middle there. We saw a major bank recently, I mean,
• 12:01
  Speaker 2: a big four bank, banned from RBA meetings, if you
• 12:04
  Speaker 2: don't mind. If you don't mind, because of this exact issues, like,
• 12:09
  Speaker 2: does it matter to you, professional investor? How much have
• 12:12
  Speaker 2: you got under management?
• 12:14
  Speaker 1: We're approximately 17 billions.
• 12:17
  Speaker 2: 17 billion. That is a big amount of money under management.
• 12:20
  Speaker 2: Do you get invited to everything you want to in
• 12:24
  Speaker 2: the way of these press briefings?
• 12:27
  Speaker 1: We tend to not go to too many of them, actually, because, look,
• 12:30
  Speaker 1: I think this is where the world has changed many
• 12:33
  Speaker 1: years ago. But in the good old days, the view
• 12:36
  Speaker 1: was you would go to company management, you'd have a
• 12:38
  Speaker 1: chat with them, and they would tell you things that
• 12:40
  Speaker 1: are not on the public record, and you could get
• 12:43
  Speaker 1: virtually access to inside information. But that's definitely a no
• 12:46
  Speaker 1: these days, and ASIC does crack down on that. So
• 12:50
  Speaker 1: there's not, there shouldn't be, let's put it this way,
• 12:52
  Speaker 1: there shouldn't be any information that's sort of, insider that's
• 12:57
  Speaker 1: releasing those analyst meetings, etc. I've been to quite a
• 13:01
  Speaker 1: few in the past and most of them it's management
• 13:03
  Speaker 1: just blowing their own trumpet to some extent.
• 13:06
  Speaker 2: Telling you how great everything is going. Yes, that's right. Yeah,
• 13:09
  Speaker 2: I know all too well.
• 13:12
  Speaker 1: So we don't tend to spend a lot of time
• 13:15
  Speaker 1: there but Look, I don't think it's a big deal
• 13:18
  Speaker 1: these days. I think maybe 20, 30 years ago, that
• 13:22
  Speaker 1: was definitely a concern, and that's why ASIC has pushed
• 13:26
  Speaker 1: the companies and made sure that they aren't disclosing it.
• 13:29
  Speaker 1: But look, occasionally there might be something that's let slip,
• 13:31
  Speaker 1: and if a company does do that, they should technically
• 13:35
  Speaker 1: immediately announce it to the market that they've said something that's.
• 13:39
  Speaker 2: I imagine, Ranjan, and all listeners, it's more an issue
• 13:43
  Speaker 2: with small caps. because it's the whole thing so tight
• 13:47
  Speaker 2: and maybe not many people turn up to their briefings anyway.
• 13:50
  Speaker 2: They're so delighted that someone actually arrives. They probably tell
• 13:53
  Speaker 2: the broker more than they should. That's one thing. But
• 13:55
  Speaker 2: then at the other level, it's stunning really that the
• 13:57
  Speaker 2: RBA have had issues with major banks and their briefings.
• 14:01
  Speaker 2: And there's always issues around that. How do you communicate
• 14:04
  Speaker 2: effectively to the market without giving someone privilege over another? Don,
• 14:08
  Speaker 2: is there some AI software or something that you guys
• 14:11
  Speaker 2: can use to tune into some of these often terribly
• 14:14
  Speaker 2: boring briefings and pick up what matters? There is actually, yes.
• 14:20
  Speaker 1: We do use artificial intelligence to actually read our management
• 14:24
  Speaker 1: transcripts to try and.
• 14:26
  Speaker 2: Pick out the tone of it.
• 14:28
  Speaker 1: But remember that, because the problem is in Australia, there
• 14:31
  Speaker 1: are 300 companies and we also manage global equities as well.
• 14:35
  Speaker 1: And there are literally, we track about 10,000. So there's
• 14:38
  Speaker 1: no way anyone has a team big enough to be
• 14:41
  Speaker 1: able to read all of those. And so we do, uh,
• 14:45
  Speaker 1: use AI techniques, but also a targeted. So for instance,
• 14:48
  Speaker 1: we'll be looking at keywords around dividends because we are
• 14:52
  Speaker 1: very income focused at franking credits. Right. Right. Um, but yeah,
• 14:56
  Speaker 1: look at these and we've been doing this for a
• 14:59
  Speaker 1: number of years. So this isn't something that's like just
• 15:01
  Speaker 1: Johnny come lately in the last 12 months where everybody
• 15:03
  Speaker 1: gets hyped about, um, We've been using these sorts of
• 15:07
  Speaker 1: techniques for quite a while to find out little bits
• 15:10
  Speaker 1: of information that might be hidden somewhere.
• 15:12
  Speaker 2: That's fascinating. It's like an enhancement of Control-F on the
• 15:16
  Speaker 2: PDF if you're looking for the word dividend. When I
• 15:19
  Speaker 2: go into the budget, I do Control-F, super, etc. So, okay,
• 15:24
  Speaker 2: just one last thing on that. Is it worth it?
• 15:27
  Speaker 2: Do you think it's an enhancement to your actual effectiveness?
• 15:32
  Speaker 1: Yeah.
• 15:33
  Speaker 2: Look, it.
• 15:33
  Speaker 1: is marginally beneficial, but I wouldn't say that it's changing
• 15:37
  Speaker 1: the world dramatically. And I think this is where there's
• 15:39
  Speaker 1: a lot of hype about AI and it's going to make,
• 15:42
  Speaker 1: no one's going to have a job and all this
• 15:43
  Speaker 1: sort of stuff. But the reality is you need to
• 15:45
  Speaker 1: be very cautious the way you use it. And I
• 15:47
  Speaker 1: think the benefits are still relatively marginal. Now, maybe over time,
• 15:52
  Speaker 1: they'll definitely get better and et cetera, but you need
• 15:55
  Speaker 1: to be very careful how you use it. And at
• 15:58
  Speaker 1: the moment, the results, yeah, they are marginal, but there's
• 16:01
  Speaker 1: a benefit in doing it, but it's not, chalk and cheese.
• 16:05
  Speaker 2: Very interesting. I read a terrific piece in the Wall
• 16:08
  Speaker 2: Street Journal last weekend where one of the chiefs of
• 16:12
  Speaker 2: AI at Meta, who is also a famous economist in
• 16:17
  Speaker 2: his own right, said that the current levels of AI
• 16:22
  Speaker 2: were no more intelligent than the average house cat, which
• 16:26
  Speaker 2: was an extraordinary thing to say for someone who was
• 16:28
  Speaker 2: in the head of AI at Meta. Now, that's not
• 16:31
  Speaker 2: as simple as it sounds, but he was making the
• 16:33
  Speaker 2: point that many were overestimating its impact. And if he's right,
• 16:38
  Speaker 2: if he's right, of course, then you've got to question
• 16:40
  Speaker 2: a lot of the heat around AI stocks, NVIDIA, or
• 16:44
  Speaker 2: even you just mentioned Goodman or NextDC, et cetera. But
• 16:48
  Speaker 2: we'll come to that another time because we've had some
• 16:50
  Speaker 2: specialists on AI. All right. Thank you for the question, Ranjan.
• 16:53
  Speaker 2: Really good topic there. And this is information only, everybody.
• 16:58
  Speaker 1: You know that.
• 16:58
  Speaker 2: It's not advice. Okay. Very specific question from Josh. Is
• 17:02
  Speaker 2: there growth left in Transurban? Over five years, it's down 8%,
• 17:06
  Speaker 2: small dividend. Interesting question, Josh. Now, Transurban was very much
• 17:11
  Speaker 2: one of the very much like basically the banks, the
• 17:14
  Speaker 2: two supermarket groups. If you were so inclined and prepared
• 17:18
  Speaker 2: for the cyclicality, the two big miners and then Transurban,
• 17:22
  Speaker 2: they really were the backbone for dividend players in the
• 17:26
  Speaker 2: share market. Transurban, I look at the stock and I
• 17:29
  Speaker 2: see it's been doing nothing for years. I see that
• 17:31
  Speaker 2: it was a fabulous stock for a long time. It's
• 17:33
  Speaker 2: dividend yield, as I recall, it's about four. It's actually
• 17:37
  Speaker 2: more or less the same as the market, so there's
• 17:39
  Speaker 2: nothing particularly wrong with it.
• 17:41
  Speaker 1: Have you any view on it, Don? Well, again, it
• 17:44
  Speaker 1: doesn't have franking, so that makes it less attractive for us.
• 17:48
  Speaker 1: I mean, you look at it, it essentially owns toll roads,
• 17:51
  Speaker 1: and so what you need is either more cars on
• 17:54
  Speaker 1: the road or they need to lift their prices, and
• 17:57
  Speaker 1: those prices generally are linked to inflation. Some of their
• 18:01
  Speaker 1: roads have.
• 18:01
  Speaker 2: A bit more.
• 18:03
  Speaker 1: ability to do it. But I think COVID, now it's
• 18:06
  Speaker 1: four and a half years ago, but showed that these
• 18:08
  Speaker 1: things are safe as gold. Demand can change and maybe
• 18:14
  Speaker 1: it's still a long way away, but if we have
• 18:16
  Speaker 1: self-driving cars or other things, maybe there'll be more cars
• 18:19
  Speaker 1: on the road, maybe there'll be less cars on the road.
• 18:21
  Speaker 2: So who knows what the... It's very interesting. So it
• 18:25
  Speaker 2: sounds like it's not the stock it was.
• 18:29
  Speaker 1: Yeah, I think, to be honest, we've never been a
• 18:31
  Speaker 1: big fan because it does have the franking It's not
• 18:33
  Speaker 1: a high yield, so it's relatively safe, but safe stocks
• 18:38
  Speaker 1: can get hurt when you have a COVID event.
• 18:41
  Speaker 2: Just like you were talking about the cities on Mondays
• 18:44
  Speaker 2: and Fridays, I am still, even now, amazed I can
• 18:48
  Speaker 2: drive home on a Friday afternoon so easily. It used
• 18:51
  Speaker 2: to be hell. And I just cruise home every Friday afternoons,
• 18:55
  Speaker 2: which tells me that I am among the minority that's
• 18:57
  Speaker 2: in the city. All right, Nick, it's been a turbulent
• 19:00
  Speaker 2: start to the year for Minres Mineral Resources, one of
• 19:03
  Speaker 2: the big lithium players. Huge price drop, followed by mixed headlines.
• 19:08
  Speaker 2: Do you see bright prospects for Minres and lithium? Well,
• 19:13
  Speaker 2: Rio Tinto certainly see bright prospects, and they just paid
• 19:16
  Speaker 2: a hell of a lot for the Arcadian lithium operation.
• 19:19
  Speaker 2: I mean, a lot more than anyone thought it was worth.
• 19:21
  Speaker 2: It's obviously worth a lot to Rio because they can
• 19:24
  Speaker 2: knock it into this extraordinary, fantastic global mining compendium of
• 19:30
  Speaker 2: resources that they have. Where are you on the miners?
• 19:33
  Speaker 2: I know they're cyclical. When they're good, they're really good,
• 19:35
  Speaker 2: aren't they, as dividend payers? And then they really topple over.
• 19:39
  Speaker 2: What's your view?
• 19:43
  Speaker 1: Well, it might be a flippant answer, but I mean,
• 19:45
  Speaker 1: miners are only going to be as good as the
• 19:47
  Speaker 1: commodity prices that they are And in the last 12
• 19:50
  Speaker 1: to 18 months, there's been a big fall in lithium
• 19:53
  Speaker 1: prices because EVs demand hasn't been as strong as people
• 19:57
  Speaker 1: have thought. Hybrids are actually become more, I think, more
• 20:00
  Speaker 1: in vogue than EVs. And there's been a lot of
• 20:03
  Speaker 1: supply because there is a lot of lithium around the world.
• 20:06
  Speaker 1: They also have iron ore, so iron ore prices are
• 20:08
  Speaker 1: also down. their two main commodities are going against them.
• 20:13
  Speaker 1: I'm probably more bullish in the longer term because I
• 20:15
  Speaker 1: think we will eventually get to a world of electric
• 20:20
  Speaker 1: cars and pet mineral resources itself is going to electrify
• 20:23
  Speaker 1: a lot of its operations and reduce its emissions. I
• 20:26
  Speaker 1: think iron ore prices probably will come back in the
• 20:28
  Speaker 1: longer term because it's not all about China. I think
• 20:31
  Speaker 1: the prospects for, and I'm talking the very long term here,
• 20:35
  Speaker 1: is India. But, you know, might be some many years
• 20:39
  Speaker 1: before India, sort of the demand from India offsets potentially
• 20:42
  Speaker 1: softer demand from China, although China has been doing a
• 20:46
  Speaker 1: few things to increase their GDP recently.
• 20:50
  Speaker 2: Yes, yeah, absolutely. All right. One last question from Michael,
• 20:54
  Speaker 2: and it's about ETFs, which I imagine you hear a
• 20:57
  Speaker 2: lot about, Don. As a user of ETFs, I've read
• 21:00
  Speaker 2: all Jack Vogel's books. Jeff Bogle being the original of
• 21:04
  Speaker 2: the species, he basically created the index fund and then
• 21:07
  Speaker 2: created Vanguard, which is, by the way, a mutual. I
• 21:10
  Speaker 2: always thought that's amazing. It's a bit of mutualized operations. Okay,
• 21:16
  Speaker 2: so here's his point. What I find amazing is commentators
• 21:20
  Speaker 2: keep referring to buying index funds as a way of
• 21:23
  Speaker 2: getting average returns. But in Jeff Bogle's words, It's not
• 21:26
  Speaker 2: delivering average returns if you're investing for 10 years. You're
• 21:29
  Speaker 2: guaranteeing yourself to be in the top 15% of returns.
• 21:33
  Speaker 2: It's a really compelling message. So many pluses about ETFs,
• 21:38
  Speaker 2: and we regularly mention them on the show. So many
• 21:41
  Speaker 2: negatives too, which don't get mentioned generally, but they get
• 21:44
  Speaker 2: mentioned on this show. Among the fact that you're buying
• 21:47
  Speaker 2: all the rubbish and all the dross on every market,
• 21:50
  Speaker 2: among the fact that you're ethically oblivious to what you're buying.
• 21:55
  Speaker 2: Among the fact that you're buying the stock that's completely
• 21:57
  Speaker 2: widely overpriced, you've got to keep buying it because the
• 22:00
  Speaker 2: ETF must do it because it must reflect the index.
• 22:02
  Speaker 2: So there are weaknesses there with ETFs. When someone says
• 22:08
  Speaker 2: to you, I like your idea, I love this idea
• 22:11
  Speaker 2: of you focusing in an expert way with an expert
• 22:14
  Speaker 2: team behind you on Australian high dividend shares. When someone says,
• 22:18
  Speaker 2: why don't I just buy a dividend ETF? What is
• 22:21
  Speaker 2: your well-rehearsed response to that, Don?
• 22:26
  Speaker 1: Well, maybe we're in the top 15% ourselves because we've
• 22:30
  Speaker 1: outperformed the index over the 13 years since the Plato
• 22:34
  Speaker 1: Australian Shares Income Fund has been willing. After fees, so
• 22:38
  Speaker 1: we've beaten the index. But I would say that includes
• 22:41
  Speaker 1: the franking, but we compare ourselves with an index that
• 22:44
  Speaker 1: obviously includes franking as.
• 22:45
  Speaker 2: Well, so that it's apples with apples. Of course.
• 22:48
  Speaker 1: The other thing I would say is I think a
• 22:51
  Speaker 1: lot of that Jack Bogle stuff is based on US
• 22:54
  Speaker 1: share markets where.
• 22:56
  Speaker 2: I think it is tougher to.
• 22:57
  Speaker 1: Outperform the index for active managers, whereas, particularly if you
• 23:01
  Speaker 1: look at the wholesale surveys in Australia, there's.
• 23:03
  Speaker 2: Quite a few.
• 23:04
  Speaker 1: A lot of Australian share managers have actually outperformed over
• 23:08
  Speaker 1: the longer term. Those are before fees, though, so fees
• 23:11
  Speaker 1: are very important. So if you think you're investing in
• 23:14
  Speaker 1: an active manager, but they've got egregious fees and performance
• 23:17
  Speaker 1: fees and other things on top of that, you want
• 23:19
  Speaker 1: to be careful about how much they're charging.
• 23:21
  Speaker 2: Okay. Very good. Terrific. Look, thank you very much for
• 23:24
  Speaker 2: being on the show. I know it would be good.
• 23:26
  Speaker 2: And we had a great discussion on this issue. The
• 23:30
  Speaker 2: dividend picture is changing. It's a paradox. Maybe that it's
• 23:35
  Speaker 2: changing because the share prices of the banks are finally
• 23:38
  Speaker 2: lifted after many years of doing nothing. But it creates
• 23:42
  Speaker 2: new issues. And it was great to talk about that today.
• 23:45
  Speaker 2: Thank you, Don.
• 23:46
  Speaker 1: Thank you, James.
• 23:47
  Speaker 2: Lovely to have you on. All right, folks, keep those
• 23:51
  Speaker 2: emails running. I could do with some more questions. It
• 23:53
  Speaker 2: comes in waves. I had too many. Now I have
• 23:56
  Speaker 2: some spare capacity, so let's have them. The money puzzle
• 23:59
  Speaker 2: at theaustralian.com.au. Questions, comments, observations, even complaints, all welcome. And
• 24:07
  Speaker 2: as I said, next week, I'm going to have a
• 24:09
  Speaker 2: bit of fun with Alex Moffat because he was on
• 24:14
  Speaker 2: the desk the day the Australians woke up in October
• 24:18
  Speaker 2: 1987 to hear that their share markets had fallen 25% overnight.
• 24:24
  Speaker 2: That is something that a lot of people can't even imagine.
• 24:27
  Speaker 2: We're going to talk about that next week. Talk to
• 24:29
  Speaker 2: you soon.