Monday, September 14, 2009

Share Investor Short: Warehouse Group yield worth a look

I don't usually do this here but I want to take a look at a good short term play.

Yeah OK, my attention span is a little limited lately due to the arrival of the stork.

Dividend stripping * is something worth doing though. That is, getting in early when a good dividend is announced and riding the share price upwards before the dividend is paid or holding on to collect the dividend then ditching the stock, depending on how you think the market will treat the company post dividend.

I may or may not have done this over the years and if I did it certainly wasn't my intention to do so, yeah OK.

The Warehouse Group [WHS.NZ] just announced their 2009 Full Year profit last Friday and along with it came a surprise to the market, a special dividend of 10c per share. This comes on top of the usual 5.5c a share paid.

The Warehouse have had a history of special dividends over the years but haven't been able to pay one for many years because of cash flow problems due to their ill-fated expansion in Australia.

With cash flows up considerably this year the dividends are now rolling in again.

If you add the 33% imputation credits and are able to use them to offset taxes then you are in for a payout of :

15.5c dividends + 5.11c tax credits = 20.61c , which equates to around a 4.85% gross return at a closing share price on Friday 11 Sept of NZ$4.25 - the net return is obviously higher if you are able to fully use the tax credits.

An excellent short term payout for doing next to nothing and it is better than a term deposit because it does not take a full year to payback.

There is also the probability that those after the dividend will push up the stock price to enable you to get out with a good capital gain before the dividend is paid, if you wish to do so.

Of course, and I have to get this in before I wrap it up. If you are a long-term shareholder in the company your return for the year would have been a 31c per share net dividend and the possibility of more than 10c in tax credits - a plus 10% net return for the year based on my share purchase price.

Long term wins again but who says you cant have the best of both worlds!

* Of course as one reader pointed out below, the process of dividend stripping, if the intention is to do that, the capital gain that you make is taxable.

The Warehouse Group @ Share Investor

Woolworths supermarket consolidation an indicator of a move on the Warehouse?
Stock of the Week: The Warehouse Group
Warehouse 2009 interim profit a key economic indicator
When will The Warehouse bidders make their move?
Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Share Investor Forum
- Discuss this Stock

Related Amazon Reading

Dividend Capture
Dividend Capture by Barbara, L Minton
Buy new: $12.69 / Used from: $6.00
Usually ships in 24 hours

c Share Investor 2009


  1. You do realise that that 'capital' gain should be treated as taxable if you buy with the intention of resale.

    Well at least you didn't document your intentions to do so anywhere - the IRD will never catch you.

  2. I suppose I should have mentioned that explicitly CJ but I did touch on it here:

    I may or may not have done this over the years and if I did it certainly wasn't my intention to do so...


Comment on Share Investor Stuff