Man you must be desperate to buy more KFL..
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Man you must be desperate to buy more KFL..
Spend some money and get expert advice. In my opinion, if borrowing, I would not bother deducting the interest because it's is a transaction that draws attention by the IRD to to all your share dealings.
All shud be ...many reasons to be desperate ...Markets are depressed as rates high so valuations are low ...but rates wont stay high forever we all know
Secondly its at steep discount to NAV which also will reverse over 2-3 years period
Thirdly it has a great portfolio which will surely do well ahead
Also its a fund and not a single company share so risk is very mitigated
IMHO buying KFL now will bear great returns in next 2-5 years ahead
When it was trading 22 cents premium to NAV I was dead sure its a SELL ....but now I am dead sure it's a BUY ....Rest is DYOR stuff
Alokdhir, i think its good buying at these levels but thats it. imo no way are we close to borrowing money to buy at these levels. Not even close to thinking about it tbh.
Come on we havnt even had the capitulation event yet... the pig farmer isnt buying..
Maybe it depends what sectors you invest in? Most of my NZX shares I hold are at lower prices than they were a year ago. But when I look at my utility category investments, in gentailers and telecommunications companies, are they cheap, in terms of yield? Definitely not. I have been looking very seriously at my holdings in this space with a view to adding, and I just can't find value.
Then I go across to my 'clever exporters' Scott Technology and Skellerup. Both doing well but a PE of 15 is the starting point for getting into those. Definitely not cheap. Then I go across to my PGG Wrightson investment, supporting our farmers. If you forget last years blip upwards, it is still trading near all time highs from a PE ratio perspective. It is much closer to a 'reduce' price rather than an 'accumulate' price IMV.
I go across to Turners which I regard as a well run company. The share price is down a bit, but big ticket items generally do not do well going into a recession.
I have never invested in the retirement sector myself, because frankly I have difficulty understanding it. I cast my eye to offshore markets and don't see a plethora of high flying equivalents to Ryman and Summerset and ask myself, why is that? Why are these businesses rated so much more highly in NZ compared to elsewhere? I have a feeling it is due to the favourable tax treatment of property in NZ fuelled by (up until a year ago) twenty years worth of falling interest rates. Day to day cashflow in these businesses is actually pretty awful. You can judge 'real profit' by how much tax these companies pay.
So yes, lots of companies trading at lesser prices than a year ago. But looked at on a price on taxable earnings basis I don't see 'cheap'. In fact I see the NZX right now, as a collective, as rather overvalued.
SNOOPY
My observation was mainly based on stocks in the KFL portfolio ...ie FPH / IFT / MFT / AIA / SUM ..etc ....Most of them are attractively priced individually too ....then getting them at 8.5% discount to current market prices ...makes them extra attractive to me at least .
History has shown KFL being a retail stock gets into limelight when markets are buoyant and looses its shine in downtrend which adds to further attractiveness at the moment .
KFL was trading at 22 cents premium in Jan 2021 ...market peak ....now it's at almost 13 cents discount ...in itself it's almost 20% gap to close as and when it gets closed in next 2-5 years ...while one waits ....we get dividends or distributions based on NAV and not current SP ...
A bit of self adulation in KFL newsletter with this headlines” We fought for a better outcome in the Pushpay takeover battle”. Good they fought the good fight
But had little faith in Push management so happy taking the money.
KFL must be close to looking at MHJ as an addition to their portfolio.
Currently just fails the T(rack record) and E(arnings history) of STEEPP investment style.
Pass with flying colours S(trength of the business), E(earnings growth forecast), P(eople/management) & P(price/valuation.
Maybe get there in next few years.
Thoughts?
A potential near term Warrant issue is another current attraction for buyers of KFL currently.
Someone earlier in this thread asked if there is any (IRD) concern if Warrants are issued too frequently that impinges on the Managers ability to do so. I didn't see a response to that. Is it only acceptable once every two years, which seems to be pretty much what happens in practice? Does anyone have any insight?
KFL will most likely bring out another warrants issue as soon as SP crosses $ 1.50 ...so that exercise price is just under 1.40 ...which shud make warrants very attractive and almost assured full participation in a years time ....when most likely KFL SP will be over 1.60 or so ....
In my opinion, the dividends are a complete red herring. The dividends can only be sourced from two sources:
1. Dividends received on the underlying investments, which will not be anywhere near the 8% or so that's paid out.
2. From effectively paying out capital (maybe from gains on sale of underlying investments) as dividends
The former is fine, but the latter is a little counter-productive, although admittedly less so being a PIE compared to an ordinary company as there is no DWT leakage
Only FPH seems pricy but it was always a market darling stock ...if u compare to valuations on Jan 2021 date then u will notice the difference ....plus these being large caps growth stocks ...u need to ignore their dividend yield ...
KFL is an efficient tool to convert growth stocks portfolio to dividend stream for income
KFL NAV has outperformed overall market in long term
https://kingfish.co.nz/investor-cent...o-performance/
PS. : Expecting a NAV of 1.405 today
Alokdhir - The outperformance table you have included in your post tells its own tale, being good news for holders.
But what is not included (I understand) is any benefit obtained by holders over the period identified from the regular Warrant issues. That benefit would be variable among individual holders according to whether warrants were exercised at a beneficial price on any occasion or alternatively were sold on market for value before the exercise date. In my time as a holder I have done both those things, with the result on each occasion of a positive outcome on a non-taxable basis in addition to the normal pie dividends paid quarterly.
The calculation will therefore be different for each holder but this extra benefit from KFL (indeed MLN and BRM too) should not be overlooked when measuring how this investment is performing.
Chris Lee gave Fisher funds a bit of a serve in todays 'taking stock' news letter. Im sharing below for anyone that wants to have a read and doesnt subscribe to it. Maybe KFL will lower its fees? A bit in there about KFL's dividend policy. Anyways sharing is caring:
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THOUSANDS of NZ investors will be rejoicing at the news that the fee-hungry KiwiSaver funds run by Fisher Funds have been coerced into abolishing the absurd bonuses previously claimed.
The Auckland-based fund manager, having recently bought the Kiwibank KiwiSaver ledger, has announced that it is voluntarily ending its double dipping, explaining that it now has sufficient scale, after the Kiwibank purchase, to cope without second helpings of fees.
Of course the decision had absolutely nothing to do with market regulator signals that the regulator would be focusing on such fees with growing disrespect.
The ''voluntary'' cancellation of an utterly unreasonable, indeed rapacious, fee structure is good news for investors.
For Fisher Funds the proactive move solves a potential problem. Fighting regulators is expensive and unwise.
Formed decades ago by a then ground-breaking young woman (Carmel Fisher) with some corporate and fund management experience, Fisher Funds set out with a business model that somewhat resembled that of Money Managers.
For two decades, beginning in the 1980s, Money Managers had filled the pockets of its founder Douglas (Somers) Edgar, dominating a blue-collar retail market. It advertised heavily and invested heavily in Edgar's personal brand. Its fees were breathtakingly extravagant.
The Fisher Fund model was similar in that it relied on heavy advertising, the personal ''brand'' of its founder, charged hefty fees, and made headway by exploiting the media, both Edgar and Fisher becoming almost daily commentators on financial markets in much the same way that the Simplicity KiwiSaver founder Sam Stubbs does today.
Money Managers ramped up property syndication, in-house funds management and third-tier money lending, enabling Edgar to carve out sufficient rewards that he could retire as what some, vulgarly, refer to as a Rich Lister.
When Edgar was repositioning himself from a small Invercargill second-tier property investor to market guru, Fisher was at Prudential Insurance in the pre-1987 sharemarket, a trailblazer in that she was young, feminine, innovative and bright, carving out a bold approach to funds management concentrating on outsized holdings of illiquid stock. Risk taking was in her DNA.
By the time she founded her own company she had genuine experience and would have seen the success of Edgar's advertising concentration and noted his energy in developing a personal brand.
In later years she converted her company into an empire by using debt to acquire databases from the likes of Tower and Kiwibank.
Unlike Money Managers, her empire has been sustainable and now is her legacy.
She locked in large, repeating fees by cleverly listing various funds – Kingfish, Marlin and Barramundi – using the philosophy she had developed at Prudential, buying large chunks of low-cap shares, Pumpkin Patch being an example of a Kingfish target.
When anyone quickly builds a holding in an illiquid stock, they will initially record valuation gains. If you keep your finger on the ''buy'' button, you drive up the share price and will value your earliest, cheaper purchases at the last, high price that you have paid. The risk, of course, is that your strategy creates a market at an utterly unsustainable level, as happened with Pumpkin Patch.
Only for a short while did Kingfish, Marlin and Barramundi thrive under this model. Today, under the new management, the three listed funds have a different model, again unusual, in that Kingfish, for example, buys quality growth shares, collects very small dividends from those stocks, but pays the Kingfish shareholders high dividends, basing the dividends on the unrealised gains of the growth shares, not on income it receives.
This formula works well in a bull market, attracting shareholders who chase high dividends. Usually these are investors who have retired and need income.
The concept is hazardous in bear markets, an obvious issue being how such a model can fund dividends without leverage or dilution.
Kingfish's share price has fallen by 45% in the past two years, the market generally having fallen by less than half of that. Dividends must fall, by definition.
Fisher Funds, having been built on debt and acquisitions, has transitioned under its new owners, the American investment company TA and a TSB bank-developed Community Trust being the owners, TA being smaller but very much in charge.
The Community Trust investment is likely to be passive, with little strategic input on issues like fees, acquisitions and economic analysis. It is reasonable to assume TA's smaller shareholding has a full voice on all financial matters. Community Trusts are represented by people with social ambitions. TA is a hard, profit-focused organisation, with an American culture.
Carmel Fisher retired at a fortuitous time before the messes facing markets today had become simply toxic.
The new Fisher CEO is Bruce McLachlan, a mid-ranked banker, a divisional manager in the banks before a stint as CEO of the tiny Co-operative Bank.
McLachlan is not an analyst, a financial strategist, a sharemarket trader or an economist. He is a practical, pleasant fellow, well equipped to be the public face of an organisation whose American shareholders are best left to perform their work behind boardroom doors.
He will be highly attentive to the views of the regulators on such matters as bonus fees and incentive payments to executives, so may become an industry leader in addressing these subjects if he does so soon.
One has to hope all fund managers and KiwiSaver managers are paying attention.
The industry's annual fees are already extreme, even without the double-dipping bonus fees, especially in those businesses that perform no or minimal research, instead aping an index or double-intermediating by use of Exchange Traded Funds, a model that adds virtually no value.
Value-add must surely be the new mantra of all KiwiSaver and managed funds.
Prime Ministerial salaries and bonuses ought to be the victim of investor demands for a fairer balance between returns and internal costs.
The late Brian Gaynor's Milford brand has a significant appetite for fees but has regularly delivered value-add, though the current environment might be challenging.
Harbour Asset management has set the standards for genuine intellectual analysis (AND no bonus fees).
Perhaps Fisher Funds will now aim at a high tier of respectability by being the first to accept that bonus fees should play no role in an era of difficult conditions.
This rant is all a bit of a yawn. I've been to several CL presentations and his audience appeared very much to be of a certain generation and the messages catered for that group. It's all just a cup of warm Milo, the late Brian Gaynor dished up hot strong coffee.
I certainly know who I preferred.
All long term investors of KFL fully understand its Dividend or distributions policy ....I hope so ...it's not truly a dividend but a distribution based on 2% of NAV of that quarter which is funded thru actual dividends received with attached tax credits and capital transactions .
If one is worried about capital erosion in bear markets as mentioned by Chris Lee then one can opt for DRP which reinvests quarterly distributions into KFL shares at 3% discount to SP thus increasing holding numbers while NAV drops thus not resulting in any capital erosion at lower levels .
Its appeal to retired people needing tax efficient and hassle free income stream is supreme as it converts growth of large cap blue chip stocks to quarterly distributions ...fully tax paid in the hands of a NZ resident individual
Its distributions are based on NAV thus when NAV falls so does quarterly dividends
Just an example to illustrate how nicely it works ...if one invested in KFL on 1st April 2010 at 91 Cents ...when term deposit rates were 7% for 5 years ...one wud have got appox 10 cents dividends per year and still have some growth of capital at present SP of 1.30 ...it wud have worked much better then locking at term deposit rate of 7% pretax ...so buying at right time does matter ...which usually is the case when rates are high and SP is at big discount to NAV ...
I
Seems to me that he is more concerned that the people he is talking about have a higher profile than he does.
Yes reminds me very much of a Kris Faafoi opinion piece, alot about nothing in particular and generally after the fact.
I don't know why either gets printed...
NAV as of Friday was $1.4069.
Still trading at $1.30
I picked up a few in the last week. Just a small start. If you reinvest and participate in warrants (when economic to do so), you quickly build a decent holding. My BRM is now my biggest holding and I have only held them for 3 years.
Will be the bread and butter of my retirement income these 3 fishy funds.
Welcome to the Fish pond Dabsman.
They have kept me fed.
NAV 1.3965
Seems they pretty useless investment fund …must have too many losers or ‘hope’ shares
Another monthly update (as at 30 April) released today.
Holders may be interested in a recent dive I did into the Warrant history for this share, given we live in hope just now for another one.
The first warrant issue (then called an option) coincided listing in March 2004 on a 1 for 1 basis, and could be exercised on any of 31 March 2006, 2007 or 2008.
The next warrant announcement was on 23 July 2010 on a 1 for 2 basis, again with multiple possible exercise dates in 2011 and 2012.
Then the situation "normalised" with the issue of warrants on a 1 for 4 basis with a single exercise date as follows:-
Announcement Date Exercise Date
28/10/2014 06/11/2015
18/04/2016 05/05/2017
02/07/2018 12/07/2019
05/02/2020 12/03/2021
18/10/2021 18/11/2022
So the gap between the previous warrant exercise date and the announcement date for the next warrant issue (the announcement date is followed by a record date to determine entitlement, and an allotment/listing date after that) for the sequence listed has been about 6 months, 14 months, 7 months and 7 months respectively.
We are now about six months after the last exercise date, so whilst any activity in this space is obviously director dependent some expectation is reasonable.
Great post, thanks.
Look back at 2017 -2018 14 months & the longest period between issues. In may 2017 SP was at 14 month low. July 2018 SP was at 20 month high. Today we are at 4 year low (excluding covid).
If I was the fund manager I would not do a rights issue at this share price. However if they do, I will back up the truck.
"Kingfish trimmed its holdings in Infratil, Fisher & Paykel Healthcare, and Summerset during the month."
Though they still have full faith in current value play ...MFT ! :t_up:
Any thoughts on where the pocket money from PPH delist will end up.
Agree with short term turbulence for it ahead ...but I am looking real long term here ...so can only add or look thru few normalisation qtrs ...on other hand it may have priced in whats ahead as market fully understand what and why of whats ahead ...
PS : I am more worried about FPH post results then MFT ...but its again short term turbulence for great companies !!
Good to see more repurchasers in the last few days
Yes ..they ready to buy big @ 1.30 too ...day before was 100K @ 1.29 ...
Its portfolio is doing very well ...only some big seller still around ...but good for us ...repurchases will help improve NAV slowly
I bought a few more today with the proceeds from a maturing Wellington Airport bond.
As per my model today KFL portfolio up 2% ...wow :t_up:
I would think that the move to tax trust income at 39c in the $ rather than 33c will increase the attractiveness of PIE investments such as KFL. Quite a large number of trusts derive taxable income and a proportion of those rely upon dividend income.
While the intended new tax rate can be avoided (as could the 33c rate) by distributing to beneficiaries who are not taxed at such rate under current brackets for personal income it may cause a measurable shift in investment behavior. Given that Robertson justified his announcement by reference to the billions (yes, billions) of $ of income shifted to trusts since 2021 as a result of the previous introduction of the 39c top rate for personal income whilst the top rate for trusts was retained at 33c the momentum towards preference for investments that are actual PIE's could be much more than the market seems to presently anticipate, and a shift could occur much more quickly as well.
I am interested in others thoughts on this.
I agree with your thoughts ...Budget have provided further reason to get into listed PIEs for trusts if they have other equity investments ...better switch to PIEs than companies ...11% tax saved is lot of savings ....not just for trusts but for individuals also ...the current discount can cover their fund costs as many here fear management costs .
KFL has come full cycle ...from big premium to big discount ....next is premium again ...not easy as steady state is almost parity or small discount
Nonetheless KFL is offering great value at current SP ....better value than most fairly valued yield players like HLG / TRA etc
where do you think the pushpay money will go?
to another stock in into current portfolio?
Rawz - I don't know, but I topped up this morning at $1.30 as KFLs current portfolio is well positioned, it will be cum a quarterly dividend shortly, and a warrant issue can be anticipated certainly before end 2023.
With the existing NTA and the buy back in operation if the discount widens I see downside as very limited even if the OCR is up at the next announcement.
Headline says Challenging year for Kingfish
Did they do well? No a terrible year …and they call themselves active investors
Seems like a few years ago they threw the darts at a list of NZX stocks and put the money on those and hoped for the best and then the managers just kept a watching brief and worked out what to sell to keep the divies coming.
Two consecutive years of negative returns (even though they said 2022 was +0.0% lol)
Not good enough
See they calling for Director nominations ….job money for jam and present lot pretty useless so let’s push for alokdhir and rawz to get on the Board….and give them a good shake up
Always good buying in the depths of despair …..might give them another go
They have already invested PPH money by drawing down previous cash position into 2% RYM , 2% EBO and 1% CEN as per latest portfolio report ...cash was down to just 1.6% ...so PPH cash will shore it up most likely
PS : Additions to older positions me noted in last portfolio position as on 31st March
One dart landed on MFB but it fell out so didn’t count
When you run with the hares and hunt with the hounds you're always a WINNER....69 (oh yeaaah)
https://www.youtube.com/watch?v=6X6eXE9IHQg
All the stars are here at humble KFL counter ...must be something cooking ...or I must have upset something or someone ...:eek2:
move over 'black monday', KFL is packin' heat....
Please dont bring SR here ...please ...:p
KFL 5 year SP change is -3%. That’s a tough one for shareholders
Thats after getting 8% per annum dividend mate ...so it's basically 37% plus in absolute terms ....7%+ PA ....acceptable or no for a yield stock or fund ...Cud have made some in 2 warrants issue in last 5 years ...I remember Mr B made tons in one of them ...maturing in March 2021 !!
PS : To give my personal experience with KFL ....I got into KFL in April 2010 at average SP of 92 Cents ....got average 10 Cents cash dividend every year for 13 years now and it's still at 1.30 ...so I shud be happy or not ...leave alone its tax benefits and other buy and forget benefits for 13 years mate ...
https://www.nzx.com/announcements/411815
For immediate release:
22 May 2023
Challenging year for Kingfish
•Net loss after tax for year ended 31 March 2022 ($19.5m)
•Total shareholder return * (-18.8%)
•Adjusted NAV return (after expenses, fees and tax) ** (-3.6%)
•Dividend return *** +7.7% (11.64cps)
NZX-listed investment company Kingfish Limited (NZX: KFL) today announced an after-tax net operating loss of $19.5m for the year ended 31 March 2023.
Shareholders will be aware of the challenges experienced by listed equities and the Kingfish portfolio has not been immune to those pressures, recording a loss for the year.
Concerns from post-Covid inflation, rising interest rates, supply chain disruption, coupled with international uncertainty relating to the ongoing war between Russian and the Ukraine have combined to negatively impact the value of the Kingfish portfolio stocks during the period.
The portfolio’s Adjusted NAV return of -3.6% (-2.7% gross performance****) was broadly in line with the S&P/NZX50G benchmark which was down -1.9% for the 12-month period.
Total shareholder return* for the 12 month period was -18.8%, largely driven by the fall in the share price, which moved from an 11% premium to net asset value, to a 6% discount to net asset value over the course of the year.
The lower return delivered by the portfolio activated the management fee rebate (the fulcrum fee*****) which reduced the management fee for the year from 1.25% to 0.75%. The fulcrum fee mechanism is a particular feature of the Fisher-managed listed equity funds which reduces the management fee when actual returns fall below the S&P/NZX Bank Bill 90-day rate.
The directors recognise that the regularity of the tax-effective quarterly dividends are important for many shareholders. In accordance with Kingfish’s quarterly distribution policy (2.0% of average NAV per quarter), the company paid a total of 11.64 cents per share to shareholders during the year ended 31 March 2023. On 22 May 2023, the board declared a dividend of 2.82 cents per share, payable on 23 June 2023 with a record date of 8 June.
Chair Andy Coupe said “Investors have experienced another tough year, with markets being driven by a myriad of factors. However, the directors are encouraged that, despite the difficult environment for listed equities, the majority of the companies within the Kingfish portfolio are delivering solid earnings. This underlying business performance allows us to remain confident in the investment strategy and the medium to longer-term resilience of the portfolio.”
Portfolio Manager Matt Peek noted that “After a tough first half of the financial year, the Kingfish portfolio recovered most of the lost ground, with a gross performance return of +7.1% and Adjusted NAV return of +6.5% in the second half. Over the 2023 financial year the market environment has been challenging. Rising interest rates and concerns over economic activity have seen defensive companies favoured overgrowth companies, which have been key to Kingfish's historical track record of strong performance. Kingfish has performed creditably against this backdrop and its portfolio is well placed moving forward.”
For further information please contact:
Corporate Manager
Kingfish Limited
Tel: (09) 484 0352
I was surprised at Gurus making fun of KFL without fully understanding its goals and objectives for the holders . IMO KFL is best safe value play in current market with regular income / yield objective and at great discount to NAV
Its always had been a great buy at good discount levels ..
Its surely subdued for last 2 years due to the fact that it holds growth stocks which are suffering due to current above normal rates environment
That is expected to change as rates have almost topped ....next 6-9 months shud start seeing PER expansion of these stocks
When its best time to get into any stock ...at that time its the most unpopular stock / option ...eg no one was looking to buy FPH around $ 18 but happy to buy around $ 26 !!! ....lol
IMHO KFL is and will be my best choice at the moment rather then trying to get into other popular small cap yield stocks currently trading above their long term averages
Its my personal opinion and choice ...based on my requirements ...DYOR about its suitability
1. Provides regular income
2. Has great blue chip portfolio
3. Very tax efficient especially for higher tax rates individuals
4. Long track record of consistent absolute returns
nice one alokdhir, you are going to make a killing over the next 24 months as growth powers ahead of the value/divvy stocks. Not only will you see huge nta growth but also SP will trade at a 10% premium again. too easy :cool:
Now that Mr B has disclosed " Significant " investments in KFL at current SP and also endorsed that its a great buy at 8% discount ...I expect better support to my original idea of KFL being excellent value buy at present ...hopefully now people will not expect 20% discounts to NAV as before ...lol ...but u never say never in markets ...anything can still happen ...but odds are in our favour ...:cool:
PS : As per his calculations KFL yields 13.43% at current discount for 33% tax payer on DRP ...on 39% it will be 14.75% ...mind boggling !!!
Alokdhir and Beagle pumping the same stock. Dream team :blush:
The yields for KFL are a complete and utter red herring, and don't stand up to the slightest scrutiny at all. Where do you think the yields come from - there's only two sources:
1. The dividends actually received on the KFL portfolio - all well and good but certainly not sufficient for 13.43% or anywhere close
2. The balance comes from the sale of parts of the portfolio, and therefore turning them from capital to income (admittedly PIE income) in the hands of the investor
That's not to say KFL might not be a good investment, especially for 39% tax-payers, but the supposed dividend yield certainly does not make it so
This questions has been discussed and fully understood by long term investors ...they come from capital growth of blue chip growth stocks more then their dividends so if u think IFT / MFT/ FPH / SUM / AIA will never grow in value then maybe one day KFL will become 0 !!!
I gave my personal example before ...which it seems u didnt read ...again I repeat ...I invested in KFL in April 2010 @ 92 cents ...got 10 cents dividend the same way ...better to call it distribution ...and even in big downtrend its almost 50% above my purchase price ...in absolute terms I got 130 Cents distributions plus 40Cents warrants benefit plus 39 Cents capital gains = 209 Cents ...spread over 13 years on 92 Cents investment ...2010-2023 is long enough to know their model of distribution works alright for income
It's not dividend but its distribution which comes from real dividends PLUS capital growth of blue chip stocks ....they DISTRIBUTE 2% of NAV every quarter ...so it provides quarterly income for retirees like me ...also its tax efficient . But one need understand its coming majorly from capital appreciation part of the blue chip portfolio ...which I reckon all here do
Well JW, I'll state a fact or three for you. I have held a large position in KFL built over 17 years. My holding cost today has more than been paid for in distributions, on top of that I have profits from selling down at market peaks, and my fully paid capital position could be sold anytime on market for the value on the day for a total profit.
You need some better facts I think.
I think you're missing the point - I certainly am not trying to suggest KFL is a poor investment - I've stressed this several times. The point I am trying to make is that to the extent that the dividend/distribution is made up of payments out of capital growth on the investments, it is simply turning capital receipts into income receipts (albeit PIE income), and thus a conversation about yield percentage is non-sensical - and certainly turning what would be capital receipts into income receipts is not tax efficient in the slightest. Nothing more, nothing less. I appreciate that it may suit you to have a quarterly receipt, and I'm certainly not arguing against it.
I feel we're slipping towards the 'aerodynamically speaking- bumble bees can't fly' argument.
Turning capital (gains) into income is actually extremely tax efficient as it happens. If it weren't the left side of politics wouldn't be bleating so much as they are..?
Can someone with a bit more knowledge clarify something for me.......
1. We all agree that the 8% of NTA annual divvies come from a mixture of dividends received on the underlying investment + sales of some shares in the portfolio (or recycling of money saved by issuing shares under the DRP instead of cash divvies +/- new investor money e.g. via warrants) - I haven't looked at the data for "total shares in circulation over time" which would be interesting.
2. If you owned the underlying shares in the same proportion you would get dividends (incl imputation credits) and (hopefully) some tax-free capital gain.
3. KFL dividends include 2 components a "fully imputed" amount and an "excluded income" amount - the latter comes with the instruction to not include it for tax purposes (yes, I know that most people don't include any PIE income on a tax return)
4. My understanding of the KFL dividend structure was that this "excluded income" represents the capital gain.
So getting to the point........If the above is true and the "fully imputed" part of the dividend is only around 20-30% of the total then the calculation of effective rates of return for individuals with a 33/39% personal tax rate is a bit more complicated as you only make a "tax saving" on the part that is subject to tax not the excluded income - overall the tax savings would only be about the same as the additional management fees for holding KFL instead of the underlying shares.
None of this changes the arguments about buying below underlying nta or having a "no hassle" income stream but I would appreciate any comments about claims that KFL yields close to 15% gross for 39% tax payers by paying a PIE net 8% of nta.
For the purpose of an investor on 39% rate it wud seem like appox Gross 15% yield ...actual tax saved is much less but nett money in your bank will seem like coming from any NZ listed company Gross dividend yield of appox 15% for 39% marginal rate investor ...IMO thats what matters to investors ...not what amount of actual tax got saved...matters is what nett comes to bank as direct credit which can be called tax paid
To make it clearer if U have TRA shares bought at $ 3.50 and u on 39% marginal rate then it wud seem like they paying gross dividend PA of 52.5cents ...
I broadly agree with your points 1-4 above. I'm not sure if any of the underlying dividends received by KFL are not fully imputed, but if so, this may affect the split between KFL's excluded income and imputed income.
Similarly, I'm not sure if their fees are charged against the imputed income or excluded income in the dividend calculation, or some mixture of the two.
Both of these things may affect the 20-30% you mention relative to holding underlying shares directly, although I suspect not materially.
Subject to the above qualifications, your conclusion is absolutely correct - the after-tax income yield if you owned the underlying shares directly is the cash dividends plus any Imputation Credits, minus your own marginal tax rate. Conversely, your true after-tax income yield owning via KFL is the total cash dividend received minus the excluded dividend portion, plus potentially an imputation adjustment if you include the dividends in your tax return AND have a marginal tax rate of less than 28%
To help u further ...excluded income was around 9.5 Cents and included income with 28% imputation tax credits attached was around 3 cents last year ...that shud help u do how it will seem like to u ...U wud have got appox 11.5 cents in bank nett tax paid for year with 0.82 cents as imputation credits attached too
Thanks, I'm a little unclear how the 11.5cents works - 9.5 & 3 are 12.5cents in the bank net not 11.5cents - or is the 3 cents inclusive of the .82 cents, so 2.18 cents cash? Maybe the cash received is 9.5 & 2.18 = $11.68?
More likely I surmise, and I might well be wrong, is that the 82 cents is correct, and the gross is therefore 2.93 (i.e. .82/.28) and the net is 2.11 & 9.5 so 11.61 in total - I have used these latter figures below so if I'm wrong so are the calculations below, but the theory remains the same.
Also, unhelpfully for comparative calculations, we don't know how much you would have received if you had owned the underlying shares direct - i.e. we do not know how much KFL has received from underlying dividends but used to pay the running costs.
However, the 9.5 is sourced from tax free gains, then it's not appropriate to gross these up for 33% or 39% tax-payers - An owner of the underlying shares would receive this amount (likely not in cash, but in value), and maybe a little more if some of the running costs are deducted. Therefore, it's only appropriate to gross up the 2.11cents net. It is equivalent to 3.14 cents for a 33% tax-payer (2.11/(1-.33)) or 3.46 cents for a 39% tax-payer (2.11/(1-.39)). By all means, factor the 9.5 cents in but not grossed up, but if so, also take into account the change in KFL share-price/asset backing over the same period or I believe it's just misleading as it's essentially a return of capital. To do otherwise is comparing a cash yield including repayment of capital (if held via KFL) with a smaller cash return but no withdrawal of capital (for a direct holder)
Again, I stress, I'm not bagging KFL - they bring something to the table even if the costs are more than the 0.53 cent difference between 3.46 and 2.93.
They've brought plenty to my table over the years. And I've bought plenty more for dessert.
JW - why don't you save yourself all the angst of trying to figure out what's inside the KFL black box and just buy $100 bucks worth and sit back and watch it work..? (And there's likely a warrant issue in the wings soon too!)
How KFL generate the excluded (capital) portion of the return is up to them. There are no doubt trading mechanisms whereby a holding may overshoot providing a sale opportunity and profit, along with underpriced opportunities allowing for restocking. They're using an active manager to run the black box and the above is normal and expected strategy for a fund manager. They know what they're doing. Selling and buying to make capital gains is not a crime is it? (unless your political thinking suggests otherwise) and I go further and suggest that this whole investment regime was actually a creation of the late Dr Michael Cullen who probably never owned a share in his life.
Taxation discussions are unnecessary. Listed PIEs are automatically excluded from individual taxation positions.
Go on be brave...give it a go 😉
I get all that, truly I do. Whilst I've never been a KFL shareholder I have been both a BRM and MLN shareholder. My issue is that, probably through ignorance, fantastical yields are quoted which simply do not stack up. If you had a term deposit and each quarter when the interest was paid you also withdraw some of the original deposit, then there's no way in the world you'd count the principal sum withdrawn as part of the return. Sure, the underlying KFL/BRM/MLN "term deposit" varies in value and mostly upwards over time, but the principle is the same, and to pretend otherwise is just wrong when comparing cash returns from KPL to dividends from direct investment
The answer is you are all right
Cheers
What we call it ? Shud it matter ? KFL is giving on 23rd June 2.82 Cents in my bank ...quarterly dividend ...with just 0.095 cents imputation credits also ...I may or may not use is my discretion ...why will I use it if I am on 39% rate ...so forget that part
How they got 2.82 Cents ...its 2% of average NAV of the last quarter
Last dividend was 2.79 Cents in the bank ...after that dividend NAV was 1.3979
Current NAV is again about 1.41 ...U will know exact tmrw
U will keep getting 2% of NAV every quarter in your bank tax paid with nothing to do ...for no additional capital appreciation ...NAV just needs to rise 2% every quarter for this to go on perpetually
Whether we call is yield or what ever ...does it matter ...if u want to replicate yourself using KFL portfolio ...u can try ...its not easy ...plus u get into grey area with IRD of doing stock trading too ...as Funds can do buy and sell without being called but individuals get into trouble with that
I think U are not liking it being called dividend or yield ...it doesn't matter what u call it ...it gives at current SP 9% tax free DRP returns ....with scope for it rising if NAV goes up ...it was 1.945 in Jan 2021 ...SP was 2.10 ...its a fund which holds great stocks which can move up in future
So unless u think its portfolio cant appreciate even 8% PA then only it will start returning your original capital as distributions while NAV starts declining after each payment
Its been listed since 2004 and has been paying quarterly payment since 2007 I reckon ...it par was $ 1 and its current NAV is around 1.41 ...so its portfolio can support 2% NAV based quarterly payments ....which for u are tax paid returns ...
Thoughtful discussion here from which I’ve learned a lot. Thanks
1st time caller. Long time listener.
Thanks Alokdhir for the insights. Seems like youÂ’ve been beating the KFL drum for quite a while and IÂ’ve started to step in time.
IÂ’ve been slow to warm to KFL over concerns the high yield may have on NAV and while the recent SP decline has been off putting, the absolute return remains attractive. Good underlying assets at below value with a good yield, tax efficient and professionally managed - whatÂ’s not to like. I bought today.
1st time caller, long time listener.
Thanks for all the insights. I’ve been listening to Alokdhir beat the drum for KFL for a while and decided to step in time.
I like the tax efficient yield. The decline in SP has been off putting but the current discount to NAV is appealing. This is a long term hold and re-invest for me. Bought some today at $1.30. Interested to see where this goes.
Having trouble understanding all this, if I buy $100 bucks worth and sit back and watch it work, what will happen? E.g. mention of receiving warrants, dividends, I'm not following. Let's say there's 2 warrants and 2 dividends per year (or tell me what a typical year is), what happens to your initial $100?
I agree 100% with Mr B that for people not needing regular income ...DRP option maximises KFL gains fully ...3% discount works well
Also KFL investment is very timing sensitive ...buying near market bottoms with maximum discount to NAV works the best vs buying at any other point ...worst time for KFL investment was when it was at premium ...like people who bought over $ 2 ...at present their income returns are also just 6% and capital also minus 35% ..
So timing matters for KFL investment ...even for longer term ...as at higher levels of NAV ...2% quarterly returns are not easily supported by portfolio without loosing steam ...IMO
clip - You are very late to the party. KFL pays dividends quarterly, the shares are cum a 2.82c quarter dividend if you buy on market currently, and there is a DRIP available.
Re Warrants - go back to my post #827 on page 83 and read that. Warrants are entirely dependent on the Board deciding to issue - when and on what terms - but there seems to be almost a policy here to do so on a reasonably regular basis and they are then tradeable/exercisable according to their terms.
Hope that helps.
One would think 'timing' of entry (and exit) of any investment matters, not just with KFL?
If a prudent investor senses that they need to be extra 'time sensitive' prior to executing an investment decision it strongly indicates that there is...
A) more perceived volatility at play with that investment opportunity and therefore..
B) at the point of exit (especially if that be over a short or medium term) there is a higher concern of not returning 100% of the originally invested capital.
Furthermore, the investor will have more uncertainty re the realistically expected investment Alpha over the term.
You’d think the way FPH and MFT share prices are heading there might be another big buying opportunity coming up
Alokdhir ..I hope they didn’t as you suggest spend the Pushpay proceeds before they got the cash …..could have bought even more FPH and MFT shares if they had held on
Very soon they will give mandate to W69&Co to do fund management ...then it will be holding all low PE stuff with solid dividend yields ...TRA / HLG will be 20% each ...lol ....and then the recession will hit retail trade deeply with both going half from recent highs ...and KFL will be sub par ...how is that for a scenario ? :eek2:
PS : I hope all remember that KFL was at 8% discount to NAV ...as per Mr B it gives 8% cushion for NAV to fall before your dividend starts reducing below 8% of your purchase price ...but yes all. is possible ...
Definitely ‘time in the market’ is their mantra rather than timing the market
Being the fund manager must be a cushy job …probably one that AI could take over
They have clearly mentioned in their prospectus their way of investing ...long term goals ...for companies having super long runways ahead of them ...MFT is their longest held jewel ...how many can dream to hold MFT from 2004 ...needs vision and belief which we lack as we see very short term like which small cap is going to be included in index next etc
Looks like the repurchase window opportunity has closed again ....
If one chooses to include KFL income in IR3 then where to add ....NZ Dividends with imputation credits of 28% or PIE income with PIR of 28% ....I reckon new IR3 pre calculates your PIR so if u include any PIE income with right tax deducted it does not reflect in your total taxable income ...as PIE tax is final tax and maximum rate is 28% ....it only does PIR rate adjustments if paid less or more ...but no effect on your total income ...while if u include KFL income as NZ dividends then its included in total taxable income for further tax calculations ...KFL imputations credits are credited as usual at 28% ...Inquired from IRD ...they say can be included at either as KFL is PIE distributions so its PIE income
You only include the the gross amount that has the imputation credit and then only do it if your gross taxable income is less than $48,000 as there is no advantage otherwise.
There is no place that I can see to put PIE income and I guess that is because there is no need to. If you want to claim the imputation then you would include it in the dividends section. It would then become taxable income with a credit of 28c/$ so if you were on a higher marginal rate than 28c then you would be having to pay the difference.
I can see both PIE income section and NZ Dividends section on my online IR3 ...thats why I was wondering to put KFL income where ? In PIE section or NZ Divi section as both result in different final tax refund outcomes !!
Second question is how to use excess imputations credits ? If u are retired with all dividends income only ?
My understanding is that - as an individual investor you don't have to declare your PIE income.
The only situation where you would include PIE income is when your total income (including PIE income) is below 28% income tax threshold - you would then be able to claim back some of the excess tax paid.
I have just received my IR3 completed by the IRD. It is exactly as I had worked out. The only reason that the PIE income is is recorded on it is for the IRD to check you are using the correct PIR. It otherwise plays no part in your return. Listed PIEs are not included as the PIR is at the maximum of 28c. As I stated if you have a gross income of less than $48,000 (including any KFL you wish to add in) then you can claim the imputation credit against your income. If it is over the $48,000 then it will cost you the difference in you marginal rate and the 28c on KFL gross dividend declared and the only place to get the imputation credit is to include it in the dividend section.
alok we went over this a couple of years ago. Probably on this thread somewhere.
I am retired as well and know they are no use to me as I am well in excess of $48,000.
Yep this had already been discussed.
Rince and repeat:
You won't get a cash refund from your Imputation credits. They can only be used to reduce final tax owed to IR.
Pie imp credits are no different to any other company imp credits. No cash refund, but if you owe tax at the end of the IR3 you can apply whatever credits you have to offset the tax owed down to a zero balance, but no further.
I just don't understand why u people cant understand my simple question !!
IF one wants to include KFL on IR3 ...where it shud go not the virtues of it or who shud do it
Answer I am looking for is ...either NZ dividends or PIE income ....as it's both as per IRD also
Why u people keep going into the merits or demerits of including KFL income ...that is well understood by me ...but will give one example for u all to understand that its not simple as u think ie only under $ 48000 u shud include
One person has only income from KFL of $ 70,000 and he gets tax credits of $ 19600 with it ...as per u people he shud not report it but while he reports it he gets a refund or tax credit of $ 4607 ...reason being KFL taxed @ 28% right from dollar 1 while actual effective rate for $ 70,000 is 21.41% only ...
This is not the issue ...issue is it goes to NZ dividends or PIE income ...rest I fully understand mates
Thanks for your time and replies ...much appreciated
PS : Also I wanted to know how to use lots of carry forward imputation credits ...Ideas being buy companies paying unimputed dividends or other forms of other income like Bank interest ...ideas about high unimputed dividends will be most welcome