Bargain Hunter
Active Member
Lemarne corporation (LMC) is a company I have followed for a while now but haven't bought in yet but will at the right price.
The management team and board of directors are extremely sensible and some of the most shareholder friendly capital managers around. They have a track record of paying good dividends and buying back large amounts of shares below book value in addition to making sensible acquisitions and divestment.
In regards to dividends over the past few years they paid out a hefty portion of excess cash that had accumulated over time as special dividends. This coupled with the fact that their business has been affected somewhat by the economic downturn and the high Australian dollar that has also impacted earnings and dividends.
Expect dividends going forward to be lower than the average of the last few years. But still a good long-term company to own at the right price. I broadly agree with you that stocks should be primarily bought for dividends. However there are some exceptions to that rule, with Berkshire Hathaway being a good example.
In my opinion any company that can earn high returns (relative to the company's cost of equity capital) on incrementally invested equity should retain those earnings. For example, if a company can grow by reinvesting 100% of its earnings and generating a 20% return on those reinvested earnings why would want them paid to you as a dividend? Are you able to consistently get 20% returns by investing the money yourself elsewhere? Hence when you have a rare situation like what Berkshire Hathaway was in the past a no dividend policy is better.
However that being said those sorts of companies are rare. The vast majority of good business with high returns on equity only have the ability to reinvest limited amounts of earnings at those high rates of return as there aren't enough profitable growth options for them.
The management team and board of directors are extremely sensible and some of the most shareholder friendly capital managers around. They have a track record of paying good dividends and buying back large amounts of shares below book value in addition to making sensible acquisitions and divestment.
In regards to dividends over the past few years they paid out a hefty portion of excess cash that had accumulated over time as special dividends. This coupled with the fact that their business has been affected somewhat by the economic downturn and the high Australian dollar that has also impacted earnings and dividends.
Expect dividends going forward to be lower than the average of the last few years. But still a good long-term company to own at the right price. I broadly agree with you that stocks should be primarily bought for dividends. However there are some exceptions to that rule, with Berkshire Hathaway being a good example.
In my opinion any company that can earn high returns (relative to the company's cost of equity capital) on incrementally invested equity should retain those earnings. For example, if a company can grow by reinvesting 100% of its earnings and generating a 20% return on those reinvested earnings why would want them paid to you as a dividend? Are you able to consistently get 20% returns by investing the money yourself elsewhere? Hence when you have a rare situation like what Berkshire Hathaway was in the past a no dividend policy is better.
However that being said those sorts of companies are rare. The vast majority of good business with high returns on equity only have the ability to reinvest limited amounts of earnings at those high rates of return as there aren't enough profitable growth options for them.
