Suitcasing in on dividends - Is Deutsche Telekom
a worthy payer?
April 12, 2010
"Deutsche Telekom"
has withdrawn its listing from the New York Stock Exchange (April
2010). According to the media in order to save on costs. In German
that is: "Kosten sparen", which is not a bad thing.
It reminds me of the hickups I get when I think of my buy and
sell plan.
What I am up to is: buy stocks
of Deutsche Telekom in order to make money by cashing in on
the dividend that is rather large - about 7 per cent on current
price of share. To my mind an enormous size in times of low interest
rates. As a matter of fact, Telekom's dividend is a focus of
debate and quarrel..
Some shareholders take a stand
against and in the annual shareholder meeting voted against paying
out a dividend..
To my mind, the point that they
are making is: do not pay a dividend because we want the company
and its share price to be attractive, not its shareholders becoming
enriched.
Roughly, you might want to divide
the shareholders into two "camps": the ones that want
the dividend and want it to be churned out large (that's where
I locate myself - and maybe not to be put in parenthesis: where
I presumably put the German state which is the biggest shareholder
of Deutsche Telekom which once was a stately owned enterprise)
and, on the other side, those shareholders who do not care about
receiving that thing called dividend.
How come there are two ways of
seeing things? One might argue: the deniers of dividend, all
what they are interested in is speculation. Dividend percentage
is peanuts in their world, they want to make heaps of money by
bullishly putting their dimes on "higher", and they
are willing to sacrifice their "Portokasse" (box of
coins for stamps) just for the sake of however small a rise in
prestige of their stock - they want the dividend to be treasured
in. They want the dividend treasured - that's a better word for
that tactique: as long - that was the line of arguement in fact,
no word about specualtion - as long as Deutsche Telekom is deep
in debt. Me, myself, I must admit: they must be right: how come
a company pays out a dividend when there is no success, when
there are no fruits of toil that can be "shared" ("geteilt"
or "ausgeteil"). However, this reminds me of my humble
knowlege of economics: success is not measured by indebtedness.
Otherwise, a company might only be able to pay dividend from
the day it has come out of debt which I consider a possible rule:
dividends may only be paid when teh enterprise has been so succesful
that all debts have been paid back in full.
Dividend percentage is peanuts in their
world, they want to make heaps of money by bullishly putting
their dimes on "higher" and they are willing to sacrifice
their "Portokasse" (box of coins for stamps) just for
the sake of however small a rise in prestige of their stock.
They want the dividend treasured - that's a better word for that
tactique: as long - that was the line of arguement in fact, no
word about specualtion - as long as Deutsche Telekom is deep
in debt. Me, myself, I must admit: they must be right: how come
a company pays out a dividend when there is no success, when
there are no fruits of toil that can be "shared" ("geteilt"
or "ausgeteilt"). However, this reminds me of my humble
knowlege of economics: success is not measured by indebtedness.
Otherwise, a company might only be able to pay dividend from
the day it has come out of debt which I consider a possible rule:
dividends may only be paid when teh enterprise has been so succesful
that all debts have been paid back in full. Before I think of
the compromise solution that appears before my eyes which is:
success is a thing of the present - as soon as the annual income
surmounts the annual spending there is reason to believe in success
and a dividend may be paid out of the annual profit, but, only
if there is an annual profit. I must admit I always had diffficulties
and still have with the concept of the so called "cash flow"
("Fluss von Geld"?), and now I think that this word
is set up to describe somehow just what I am talking of. However,
cash flow considered under this aspect somehow dilutes the problem:
when the ship comes in - that's when the profit has been made
- and this might take longer than a year or a quarter of. Want
your nickel back? You want to wait. "Ein Schiff wird kommen"
(A ship will come). Meanwhile - as long as it "looks good",
as the ship has not sunk yet, you might sell your shares for
a higher rate, That's where the Dutch tulips come in: of course,
there is the stock exchange - but whar they are dealing with
is not "chances are" this ship might successfully sail
around the world and around and around, accumulating loads of
money in all future years, what the stock exhange admits is "betting"
on finding a buyer of last resort. I do buy these shares at an
expensive rate because I reckon on selling them as soon - and
I fimrly believe there will be someone like me - as I find somebody
who will buy them from me in a still stronger belief. Logically,
it's a matter of honesty to admit speculation and to declare
apt a speculator who know how to judge the biggishness of a bubble.
"Bubble" thus is not a bad word but a true word for
a "natural" process: what goes up must come down -
"people" who do not include into their world the fact
that the prices must - it's a rule - come down sooner or later
( the speculator's art consists in determing the point in time
when it happens) are more or less blinfolded, might not be allowed
to deal on the stock exchange.
As a matter of fact, I just turn myself
out to having recognized the truthfulness of speculation, because
I now realize what I am up to: I am willing to sell my shares
as soon as the annual dividend payment is in my suitcase and
the rate of share turns out not to suit my case. So this is another
way to speculate. For there is the possibility that there are
others who are willing to to the same - and just because of their
holding the enterprise for unable to pay the same rate of dividend
next year.
From this point of angle, Deutsche Telekom's
promise and announcement of being willing to pay as much in the
next few years is a pledge that is capabel of supporting and
keeping up the price of its shares. Coherentyl, the firm announces
within the same press realease its intention to buy back its
own shares which also has teh effect to suppport the price of
its stock (and keeps the money within the enterprise - I am not
familiar though with what happens when a company owns its own
shares - does it receive its own dividends then?).
No wonder Deutsche Telekom suppports its
share price: many shareholders have lost a lot of money in the
great bubble of the 90s.
So much for the morals. As I continue writing
today, it's the day after. The day of shareholder's meeting has
passed - how didiI get through? Did I make some
money or even lose a lot? Before the day of relevancy, it occured
to me that RWE which is a loarge supplier of electricity in Germany
experienced a decline of its share price the day after payment
of dividend - just the amount of profit you might have made holding
that stock the day before.
This should have made me aware of the dangers that I was about
to put myself in. But I carelessly let the day of pament approach
without further thinking. I even called the Deutsche Telekom
helpdesk by phone to make sure which date was the relevant date
for dividende payment and got very good advice and information
by friendly people: it suffices to be holder on the day before
the annual share holder's meeting.
Then, with Comdirekt.de I discovered the possibility of "live
trading" which actually gives you the possibility to buy
and sell after closure of the stock exchange.
All to no avail: on the day after I lett things slip away: Telekom's
shares did undergo an uncredible downfall of more than 7 percent.
So not only did I los all the profit I felt already sure of but
found myself in the dire straits of selling or holding the shares
I bought: I did not want o believe in such a deep downturn -
- they must soon rise again, probably even the same day. But
then I looked up the story of RWE: after falling 5% the day after
payment of 5% they kept their low level, there was now upturn.
It all turned out as a worst case scenario
- I made up my mind to sell via "live trading" - because
I rightly felt "being crashed". I can remember the
price being offered: 9,11 which was even less than the current
price at the stockexchange which was 9,13 at 11 o'clock that
day of the shareholder's meeting, 3rd of May 2010.
Did I learn something? On one hand I very
apparently was not the only one trying to cash in - there was
a remarkable coincidence of downturn and rate of dividend (around
7 %), so my moral thinking will give way to developing skills
to match the "mass situation". And I do not know if
I have the time and work force for that. As I am a rather poor
investor - which on the other hand lets me comprehend in a more
realistic way the reasons for historical crashes: I now think
that many poor investors did not have the means and the the nerves
to go through a phase "maybe" of loss - as soon as
they see their "incredible" profits fade away and losses
appear they rightly feel in urge to sell -- so as I am a rather
poor investor it will depend on the costs of transaction. I'll
soon be seeing the bills of the "trade".
Today, as I continue writing, It is the
second day after. I read about "ex dividend": this
concept came to my mind a bit too late. Actually, I heard about
it before, did not understand, and eben after "my war ended"
I cannot believe in it: shares are traded at a lower rate the
day after didivend payment. Can that be a rule? Can that make
any sense at all? I must search for further clarification. On
first sight, this "ex dividend" can only be a description
of what usually but not alway happens after dividend payment.
If it happens, it just describes the fact that "I am not
the only one cashing in and hopping off".
Just two points more:
Even the next day I looked up my number
with Comdirekt.de I could see that dividend has really been paid
in full amount -- I was shareholder just for one day. But what
is even more impressive to me is the accuracy and perfection
of the whole process. To my mind, this money machine is one of
the best contraption there is in our time - which of course might
have some bad slant - there are many areas of life that deserve
such accuray, promptness, perfection and technique in the same
way. I just think of the way I pay at the supermarket desk: many
coins have fallen down... "But hey... this dealing at the
internet stock exchange is worth the trouble and even losing
some money just for the sake of having experienced how well organized,
trustworthy, reliable, prompt and accurate a transfer between
human beings can be organized and set up.
Second point: I still wonder how Deutsche
Telekom can make a pledge on "7 per cent" - they did
not mean a percentage, did they. They were refering to a ficed
amount of money related to one of their shares, i.e. indepent
of of the future price of share at the market. In other words,
if they do not what to include into their vow to pay a percentage
of 20 per cent or any other exorbitant rate their announcement
implies a steady go of their price of share. Their announcement
must imply a price of share similar - or better: - not way beyond,
below the current price. How can a company undergo such a promise?
P.S. Historically, that day was a bad day
for the stock exchange. I heard it on the radio: there was a
kind of crash or slump in Spain, and the German market lost about
2 per cent, which apperently was not reflected upon in the media,
at least in my daily newspaper that was a day like any other
day.
verantwortliche imPublisher:
Net4 Internetpublishing
Peter Bernhard
:Dr. Karl Flesch Str. 7
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