The fastest way to value an income stock - MoneyWeek Investment Tutorials
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- Опубліковано 16 жов 2012
- Dividend stocks are a good bet with interest rates at rock bottom. But how do you find a bargain? Tim Bennett introduces one of investing's simplest valuation techniques - the Gordon Growth Model.
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Good question! A mixture really. I think people need a good source of financial education and hopefully that's what these videos provide. Naturally this helps promote the Moneyweek magazine/website. The series started out as a trial but has mushroomed..if people like them I plan to carry on making them. Cheers Tim.
Yeah the Ben Graham value approach is a good one too. I am glad this video is opening up a debate as valuing companies/shares is never easy and ideally we should apply several techniques and see what spread of results comes out. Cheers Tim.
Thank you for explaining calmly on the details of the growth model. It's hard to assume on assumptions but I guess that's part of trusting the formula.
Yes.. Let's keep it in English .. I don't understand why tutors always making it sound extremely complicated .. when, in fact, it is not .. I should thank you for sharing your knowledge with us and for the effective and easy method of delivering it .. That is helping me a lot with my MBA Studies in London .. Awaiting more of your valuable videos ^_^
Yes it is. The only difference is the pure dividend discount model sometimes doesn't build in an assumed growth rate (depending on which book you read) whereas the GGM does. Cheers. Tim.
thnx Tim.. I like your videos.
hello Tim! I have a doubt while you have demonstrated this method with a cash dividend I wonder if the same would apply for a stock dividend or would there be need of some tweaks as stock dividends will usually have more value in the secondary market compared to the amount actually transfered as capital!
hope anyone of you can help me out on this one!!
Hi. Yeah that should be possible sometime soon. Cheers Tim.
6:30>>
Tim, great video as always. I just have one question. You said that this model doesn't work for fast growing companies because Expected Rate of return is lower than Dividend growth rate??? I would assume that Rate of return would go significantly higher than dividend growth rate for these kind of companies.
Great video, but i'm left with a few (probably stupid) questions...
Firstly, When you work out your 'expected rate of return', it would appear that what you're actually calculating is the rate of return you'd like to be able to expect (for example your 3.0% equity risk premium- would you not be wanting to use some sort of average risk premium)? Perhap's you're valuation of the stock was higher because your expectations (in terms of your equity risk premium) are too high?
But great discussion. I always enjoy discussions and dialogue on fundamental valuation models. I always look for capital appreciation, so that's my take. But it's good to know and be able to look through all the models ...
Great vid Tim, thanks for all these, v helpful. Have visited your website as a result and thinking of subscribing. Any chance of a vid on gearing? Not operational gearing - I've watched our vid on that, but "net gearing" - which I see at the end of Digital Look Fundamentals pages.
Its a nice model looking for pure dividend in terms of income .... Its biggest assumption is: All things stay equal for the company...
But I stick with B. Graham's stuff
Is it undervalued on an intrinsic basis and does it cross the threshold for undervalued ...
5 yrs, whats the EPS growth look like
Whats the Balance sheet (esp Intagibles / Goodwill ) and Cash Flow look like
Wheres the Payout ratio on the Dividend
Where's the Debt Level ..
Add in a bit of technical analysis and bam ...
Example of regular dividend paying companies are real estate companies (not of the developing kind though). In Greece for example there’s this real estate company called Grivalia properties which is very healthy, has Watsa behind it, it’s forced by law to pay 50% of net profits to shareholders annually (there’s your guaranteed regularity right there - it always shows profits), it makes strategic acquisitions right now at very low prices (since real estate market is low here), and has a lot of potential in terms of growth since it only utilizes 12% of the allowed borrowing to size ratio when its primary competitors use about 40% (or thereabouts). It also buys own stocks regularly (even exceeding the price that is trading now).
Can you make a video on Jensen's Alpha?
Please do, the series is excellent.
Thank you
Hi tim , can you do a video on GREEN SHOE OPTION :)
Hey Tim, or any one who might know, what is your main reason for doing these videos? Is it to expand the knowledge of the financial sector to the general public?, is it to promote the moneyweek magazine?, or is it just part of you job description?
I bet you would be great as a host on Have I got News for You
As for today VOD share price is 224.80p
This guy is the best
The real advantage If eel, is the comparisons with the companies own Bond rates. That's the advantage I think this has over Graham. This looks to the companies own bond rates ... and Graham looked at AAA 20 Year Corporate Bond Rates when I.V. was formulated ...
Awesome formula for getting a ballpark value for a dividend stock! This will be a nice tool for finding potential investments!
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I would have had inflation at 3 or 4 % at least despite the BoEs "target". And 3% i would consider their good year. Taking it at 4, then taking the difference meant a stock value of 416. Which does make it look like a mega deal
Nice
the best and brutal way is to use each stocks individual ratios with zero growth times the stocks Beta and couple that with usual valuation metrics , so if a stocks roe is 18% and its beta is 2 then your discount rate is 36%
Hello, Tim, is this also called the dividend discount model? Sorry if you mention this in the video, I haven't started watching it yet.
Greatest
steward downing's Dad !!! :P
how to beat low rates? deposit Cyprus's banks which provide rates of 4-5%, or register your company with 10% corporate tax !
8:52
For companies:
*In existence for some time
*Established dividend payers
*The hurdle rate is essentially bigger than assumed div growth rate
(or I should say ... reformulated)
What is it worth?
🅰️ What does it pay?
Hey, have you wondered this thing called the Intellitus Cash System? (do a google search). My mother says it earns people oodles of money.
Whoa!
I'm uncomfortable with compound approximations and assumptions.
The contents of the denominator weren't pleasant.
Another way to determine if a blue chip is cheap or expensive is the chart.
Investors can avoid a world of pain if they learn the rudiments of technical analysis.
Ironic isnt it?
YOU FOOL! Why would I go and lend money at low rates when they're inevitable to rise. E.g. your offering me 4-5%? Well when bond prices end up falling (which will be inevitable) I could assume much higher rate of return than 4-5%!!!
I hope no one takes your advice.
the value of a house is that which someone will pay no more no less.
British accent makes me sleepy .
Egg on your face about cyprus banks now...
I don't know the guy, but at least in this video, he speaks like cheap news channel host with those irritating pauses every 3-4 words. He needs to listen to that TED talk on "how to speak so that people will listen" or something similar.
lol
Thank you