Weekly Thoughts 22 January 2016

I spent the morning in Durban today listening to fund managers from six different asset management houses. Some interesting news and some irrelevant information.

Two simple and clear examples of how a company can be fine while the stock market has caused the concerns that it has, is well illustrated by looking at Coca Cola and Clicks. When you buy a Coke, you don’t walk into the corner café and think, ‘no, their share price is down at the moment, I won’t buy a coke today’. You simply want a Coke! Ditto when shopping at Clicks, you want that thing that you’ll find there and not somewhere else.

The graphs below show how the share price of these two companies has fluctuated while their dividend payments have remained stable, growing steadily. And this because income and value are unrelated. The line shows share price while the vertical bars show dividends, which is the income part of the process. Share price has had little to no effect on the income, meaning you and me buying that Coke, supplying profits and creating the dividend.

CocaCola Graph

Clicks Graph