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J#19: Rich Pickings! There are over 183 companies in our research universe of potential Double Digit Dividend investment gems.

Double Digit Dividends universe

In today’s journal I answer the second of the two most frequent questions I receive from my readers.  

You may recall, the two questions were:

  1. To qualify as a Double Digit Dividend recommendation, are our dividend yield thresholds net or gross of withholding taxes?
  1. Where do you source your investment ideas?

The first question was answered in my journal “Maximize your dividends by minimizing your withholding taxes.”  Let’s now turn to the second question.

The short answer to question 2 is we source investment ideas via a lot of hard work, by sieving through large amounts of data using a structured approach.

The Sieving Data Approach

We regularly scour through various data sources such as Bloomberg, Yahoo! Finance, Market Access, the Wall Street Journal and two other independent 3rd party screening systems to build a universe of potential candidates around the world worth investigating.  

The challenge we face here is that a portion of the data is always inaccurate and therefore requires cross-checking with other sources and ultimately, delving to the primary source of “truth” – the company’s financial statements and announcements to the stock exchange. 

A good example of an inaccuracy I encountered recently was on our second recommendation — Jupiter Mines.  A screenshot from Bloomberg is provided below.  It states Jupiter Mines’ yield is 5.45%.  In contrast, Market Access reports a yield of 16.96%.  Same company but there is a big difference in reported yields.  What is the reason for this discrepancy?  Most likely different data providers have different processes to capture the data they publish.

key statistic from Bloomberg from Jupiter Mines
Source: Bloomberg.
Source: Market Access.

The table below summarises the universe that we have identified to date.  There are 183 possible gems for us to explore.  Of these, 18 have a yield of 16% yield and above, and 29 companies yield between 14% and 16%.

Potential Double Digit Dividend Investment Gems
Potential Double Digit Dividend Investment Gems

The key take-away from the above table is there are 183 potential gems for us to research. 
All we require for our model portfolio is 10 to 15 stocks per our
mandate
With 183 potential investment gems, there are rich pickings for us to choose from.

A “By Country” breakdown is provided in the table below.  You will note that the data is incomplete as frontier markets are not included in our list.  This is another source of our investment gem hunting process.  There are likely to be much more than 183 companies we need to sieve through if we include frontier markets.  We continue to build our processes and refine our data sets to identify potential investment gems.  Our goal is to have a robust proprietary system for our own use.  

By Country breakdown of potential investments
A ‘By Country’ breakdown of potential companies.

And if 183 is not plenty enough, we also search through stocks yielding between 9% and 10%.  There are 122 stocks in this universe (see table below).  The reason for including them is that they form the basis of our “Watch List.”  

Should we identify a stock that we like to own but which is currently too expensive to buy, we add it to our watch list.  When the company’s price drop into our buy range and its investment thesis remain intact, then we’re ready to pull the trigger and start buying.  Mr. Market can be irrational, we just need to be patient.

Companies Below 10% yields
Number of companies with yields that fall marginally below 10% that we intend to monitor closely.

You might think, researching 183 double digit dividend companies, plus 122 on a watch list is a huge task. It is! But I am part of a team working to spot the ones that are easy to invest in wherever they are in the world, and with a combination of low-risk and high yields. Tim, for example, makes an effort each day to read the headlines of all Australian Securities Exchange (ASX) company announcements, and on a quarterly basis, another colleague is in charge of finding companies priced below their cash backing.

Hard work but you get to know the universe of Australian stocks well.  This is how Jupiter Mines, an investment gem was found … by reading the headlines of EVERY ASX announcement.  You did not have to go far in the case of Jupiter Mines as the ASX announcement’s headline said it all but ONLY for those that were looking!

Jupiter delivers 24% Yield

The legendary investor Jim Rogers once said, “The way of the successful investor is normally to do nothing — not until you see money lying there, somewhere over in the corner, and all that is left for you to do is go over and pick it up.”  

I do agree with Jim Rogers, there certainly is plenty of money to be picked up “somewhere over in the corner”, but you won’t see it by doing nothing. You need to look around in every corner and when you see something, you also need to make sure the money is real.  That requires hard work, a structured approached and application of experience built day-in and day-out when looking for those investment gems.

Stay safe and until my next journal.
Peter

A Message for My Children

Although they may appear as a cliché, writing this journal reminded of the following quotes that I think are applicable to the journal’s content:

Quote 1:

“Lucky People GET opportunities;
Brave People CREATE opportunities;
And Winners CONVERT problems into opportunities.”

Quote 2:

“Luck is what happens when preparation meets opportunity.” – Seneca

Kids, do you agree with these statements?  

Seneca qoute

The second quote comes from Lucious Seneca (also known as Seneca the Younger).  He was a philosopher based in Rome just after the death of Christ (Seneca died in the year AD65).  He is also famous for the following two quotes.  

Quote 1:  “Every new beginning comes from some other beginning’s end.”

Quote 2:  “There are more things, Lucilius, that frighten us than injure us, and we suffer more in imagination than in reality.”

Both quotes although are written nearly 2000 years ago are relevant to our investment process.  

With the first quote, please read my J#11 journal – “Boosting your investment results with the right exit strategy.  In this journal, we discuss having a pre-planned exit strategy for all our investments so that our monies are recycled to invest in better opportunities or closed out to stop further losses.

For the second quote, please read our J#18 journal – “I am Investing in Tim Staermose’s African Lion Fund” where I caution about our preconceived cognitive biases.

Your Dad is not a big reader of philosophy.  I did not study it at university or school but I do get a thrill joining the dots to what was said 2000 years ago to what we do today.    Perhaps reading up on philosophy and philosophers may give you more insight into whatever you do in your journeys ahead.