I have applied. The way I look at it is that if I can get 3.x% then that is at least 3 times more than I am getting now on term deposits. So why not put up to (or less than) 1/3 of spare funds into that and then play with (or sit on) the rest?
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I have applied. The way I look at it is that if I can get 3.x% then that is at least 3 times more than I am getting now on term deposits. So why not put up to (or less than) 1/3 of spare funds into that and then play with (or sit on) the rest?
The SP and NTA, will be looking good at 31 March, as there will be more certainty regarding the development and absorption of the Waterford property into the company scheme of things by then. High growth and high inflation are a good catalyst for a property owning company, that earns subsidiary income from care. Only the thought of Covid holding back this SP.
Makes sense, but in a years or two, the interest rates on TD may be in the 3% or over. You will have no choice but to hold to maturity as the market value of the bonds decrease based on yield. Having said that can't hurt to have some bonds, if the bank goes bust. Argh what to do?
Addendum, talked me into it. Got an allocation from Jarden Direct. Looked at the yield available on fixed interest and bonds, still very low. May be a quick buck to be made when they first are available on the bond market. Or if I have to hold till maturity still a secure investment. Have to park some of the proceeds of my ZEL takeover windfall somewhere.
5 year rate with BNZ is 2.0% and I am sure you'd get a bit higher if you offered to lock in for 7 years but I for one think its safer in OCA.
Its an interesting conundrum for sure. On one hand its perhaps unwise to have everything in equities and yet on the other what's the point in investing in bonds if you know the after tax return is significantly lower than inflation ?
Good question, plenty of answers.
For me, the answer is that there is more to any investment than simply the after-tax return. Liquidity, security, income, consistency, political risk, and other factors are also in play. So it’s also about diversification.
Diversification is simply a strategy for reducing the risk of capital or income loss. But it isn’t the only strategy to which I subscribe and which I implement across the portfolio.
Diversification runs across asset classes, as well as across individual investments within an asset class, and it’s diversification that means that I happily hold OCA shares as well as OCA bonds.
The shares have the potential for a dividend yield improving over time, while the bonds deliver consistency of yield. However the bonds will continue to pay interest should the dividend be cut or suspended.
Neither may seem likely at the moment, although I do see a degree of political risk around the occupation-rights model prevalent in the listed retirement village operators.
I believe that that’s more likely to impact the shares’ dividend and price than the bond’s coupon payments.
I'll never diversify myself rich. . .
I'll never diversify myself rich. . .
Probably never diversify broke either.
A large over subscription will show confidence in OCA as a business, which bodes well for equity investors in the future.
Looks like they'll pay down some bank debt, as they suggest, it's too restrictive to borrowing for future growth, due to the covenants (50% LVR & Interest Coverage Ratio > 2.0). It will be interesting to see how much they use for acquisitions, $30M Bank debt, $70M Acquisition and development?
How will they fund further acquisitions for growth and pay down debt?? Follow SUM, and do a third Bond issue? or tap into equity investors?
Exciting times ahead.
Pushing on towards an all time high. Good times ahead with bond issue, share accumulation and announcements eminent.