UOS 1.85% 55.0¢ united overseas australia limited

@travelightor I'm not sure if you've made an error here or if I...

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    @travelightor

    I'm not sure if you've made an error here or if I am misunderstanding you. Referring to your initial example, if shares on issue grow at 5% annual rates, and you participate fully in thd DRP, and NTA's per share grow at 10%, then your share of NTA's will grow at about 15%, yes I agree. In other words your share of the pie will grow at the same rate as the pie itself. Sure.

    But, if NTA's are only growing at 10% rates ( ie the pie is growing at 10% rates), and you participate fully in the DRP, then your share of the pie will grow at the same rate as the pie itself (10%), assuming essentially everyone participates fully in the DRP. If on the other hand you take all your dividends in cash, then the pie will grow at 10% but your share will shrink at about 5% rates, thus giving you a return (growth of your share of NTA's) of about 5%. Your share cannot grow at a faster rate than the pie itself.

    But the issue is that if NTA's (total pie) grow at historically low rates, going forward of 10%, that would imply returns on average annual equity, going forward, of only about 9.5%. The question then is, what will the cash component of returns be, relative to the unrealised component. If it is mainly the cash component that shrinks, then the dividend payout is likely to shrink, and thus the DRP dilution will be diminished. But then, a prolonged period of low cash returns is unlikely (perhaps) to sit side-by-side a prolonged period of high unrealised gains. So a prolonged period of low returns is, perhaps, likely to constitute a period of high payout ratios. If this is associated with an even greater price discount to NTA's, then the dilution rate may start looking even scaryer. But of course, this dilution is immaterial if everyone is participating fully in the DRP (in which case everyones slice of the pie will grow in lock-step with the pie itself).
 
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