Dividend, and nothing else!

I would like to share my thought after attending a shareholders presentation by a closed end fund recently. I went to the venue early and there was no one there yet except a few staff setting up the place for the presentation.

It was in a ballroom and I think there were about 250 seats and I was telling myself, could it be another over optimism by the organiser as 2 weeks earlier I attended a PLC's shareholders presentation with only 5 persons turned up. To my surprise, the hall was filled with people later on, I would say at least 95% full and they are mostly senior citizen. Well, I thought they must be here for the free lunch. So I decided to chat with a few of them at lunch session.

The few persons I spoke to are either retirees or about to retire and they share something in common - they are less concern on the price volatility as they hardly sell those stocks that they bought. They are more concern whether the DIVIDEND they receive are sufficient for their retirement life as this cashflow will affect them, not the up down of stock price. (of course I think if the stock price goes up, one can always sell some to cover the cashflow but to them, this is not in their mind as they see it as depending on capital rather than income to sustain a living).

From the questions they asked the management, I would say many of them are well educated and with sound financial knowledge. I like the way management responded too as they not only highlighted their big wins, but also provide reasoning and lesson learnt on the big losses where they went wrong.  

There is something probably we all could learn from the fund strategy which has recorded 17.5% CAGR over the last 20 years, which I believe there must be something they have done right.

Investment Methodology used by them:-

1. Screen for growth or undervalued stocks

2. Evaluate both qualitative (management) and quantitative (forecast EPS growth & valuation)

3, Buy when a catalyst is identified

4. Sell when valuation is reached

 

It appears to me that we may all know about this, so the key then must be execution - which includes patience and discipline.

I came to agree with the investors I met in the presentation - one can only sit calm when the market is down if one still receive good cash inflow without having to worry about paying your living expenses. Hence, DIVIDEND is one key ingredient to investment for long term.