I now hold SUM too :)
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I now hold SUM too :)
Good to see one of the directors has been buying on market , even if the amounts are small
The most significant news for SUM shareholders, in my opinion, is the increase in development/new sale margins. If this trend continues and they can close the margin gap between them and RYMAN it will be a good sign for investors.
I cannot see them (retirement facilities) paying much in dividends because by their very nature...all excess cash will be used to grow their base business which is very cash reliant in having to fund new homes and properties... Constant forced growth means bugger all in dividends. Maybe in the future if they plateau out regards demand.
Agree - Ryman has strong operating cashflows but it all goes back into development. Plus I dont think they pay much in the way of tax so they cant impute their dividends. [edit - just checked. Ryman doesn't impute at all which makes sense. The operating model of Retirement villages, especially historically when they use to be able to depreciate builds, meant they were always in a tax loss position.}
RYM [and I expext SUM] pay out a small % of their profit.What you must consider is how wisely they put to use the money they don't pay out.If they can make 15% plus on that money you will enjoy great compounding profits,which will drive the SP.
If you can earn over 15% you are indeed best to look at company's that pay out most/or all of their profit.
Actually I believe RYM have a very healthy dividend payout ratio of 50%.
The cashflows that are reinvested in villages over and above the other 50% of shareholders funds that is retained (not paid out as a dividend) represents cash from the refundable license to occupy, and could not be paid out as dividends anyway. It is this ability for RYM to "Recycle" its capital from village to village that allows it to generate such high returns.
Would you prefer they paid out 100% of underlying profits? Not me. The 50% "shareholder funds" they retain for growth are able to generate a 30% internal rate of return. This is BECAUSE they can recycle the capital by generating ever growing refundable occupancy right cashflows.
This is so so much better than getting more in the way of dividends, that you should consider losing your left arm to find businesses like it, particularly when the downside risk is reasonably limited (downside risk is arguable I suppose, but at least in my view).
As an owner, I know I can't get a 30% compounding rate of return if I am holding the cash, so I prefer them to keep as much of their underlying profits as they feel they can safely put to work at those excess returns. That said, from my perspective, Ryman (and perhaps SUM also) are, and will always be, a great payer of dividends. With those dividends growing fast.
Regards,
Sauce