3. What are Payers & Growers™?
Simple definition:
“Companies that pay a dividend and grow that dividend
continuously over time.”
Dividend aristocrats (US) definition:
“These are large, blue chip companies that have
historically provided better performance and lower
volatility than the S&P 500 as a whole.”
SOURCE: Grindrod Asset Management & Forbes
4. Why invest in Payers & Growers™?
"According to Ned Davis Research, stocks with
growing dividends outpaced the U.S. market from
January 1973 through September 2011, registering
annualized total returns of 9.21%. Yet they had a lower
annual standard deviation, at 16.45%, than those that
paid little or no dividend."
Annualised Return
Standard Deviation
S&P500 Dividend Cutters
-1.02%
25.9%
S&P500 Dividend Non-Payers
1.74%
25.9%
S&P500 No Change in Dividends
7.00%
18.6%
S&P500 Dividend Growers
9.21%
16.5%
SOURCE: Barron’s & Ned Davis Research
5. Share prices rise as earnings/dividends rise
“Capital growth is a function of earnings/dividend growth.
Businesses become more valuable as their profits rise.”
Standard Bank (SBK)
700
16000
600
14000
12000
500
10000
400
8000
300
6000
200
4000
100
2000
0
0
'01
'02
'03
'04
'05
'06
'07
Dividends per share (RHS)
SOURCE: I-Net Bridge & Grindrod Asset Management
'08
'09
'10
'11
'12
Share price (LHS)
'13f
'14f
'15f
6. Payers & Growers™ equity portfolio
“A portfolio of businesses that reward shareholders with
consistent growth in earnings & dividends.”
VODACOM
AVI
TRUWORTHS
BIDVEST
BRITISH AMERICAN
TOBACCO
TIGER BRANDS
SPAR
CORONATION
FIRSTRAND
SASOL
INVESTEC PLC
STANDARD BANK
LIBHOLD
SAB MILLER
LIFE HEALTHCARE
REUNERT
MMI HLDGS
OLD MUTUAL
MTN
MR PRICE
7. Equal weighting – a disciplined approach to investing
Each security enjoys
an equal weight in
the equity portfolio
Equal weights = disciplined approach
sell expensive income streams
Investing proceeds into more appropriately priced income streams
Equal weighting (vs market cap weighting) added approximately 2% per annum to
portfolio total return over the past 10 years
SOURCE: Grindrod Asset Management
8. Listed property – the ultimate Payers & Grower™?
Valued relative to bonds (i.e. on a yield-relative basis)
• listed property yields are high
• companies pay out 100% of earnings
Distribution growth exceeds inflation
•
•
•
•
contractual rental escalations
gearing
internalised management companies
active asset management
Total returns are expected to exceed 15% per annum
Volatility of returns should be lower than the equity market
SOURCE: Grindrod Asset Management & Forbes
9. Diversification benefits of listed property
COMPARATIVE TOTAL RETURN INVESTMENT CORRELATION
Date period for upper right: October 2003 – October 2013 (10 years
Listed property
All Share
All Bond
Small Cap
Listed property
1.00
0.26
0.65
0.63
All Share
0.13
1.00
0.07
0.68
All Bond
0.73
0.21
1.00
0.34
Small cap
0.40
0.70
0.35
1.00
Date period for lower left: October 2008 – October 2013 (5 years)
SOURCE: I-Net Bridge & Grindrod Asset Management
10. Diversification benefits of listed property
“Listed property provides significant diversification benefits
due to its lower volatility and high absolute returns.”
Monthly Returns - 2008
15
10
5
0
-5
-10
-15
Jan
Feb
Mar
Apr
May
100% Equities
SOURCE: I-Net Bridge & Grindrod Asset Management
Jun
Jul
Aug
Sep
50% Equities / 50% Listed Property
Oct
Nov
Dec
11. Payers & Growers™ listed property portfolios
Securities are selected to suit portfolio mandate
• A & B unit structures afford opportunities
• able to construct a high yield or high growth portfolio or a
combination of both
Opportunities exist to enhance returns
• private placements (issued shares at a discount to market or
receive a pre-commitment fee)
• smaller listed property companies deliver superior returns due to
higher yields and income growth rates
13. Grindrod Stable Growth Fund
South African – Multi-Asset – Low Equity
Payers & Growers™
Equities
Payers & Growers™
Listed Property
Fixed Income
40% of portfolio
25% of portfolio
35% of portfolio
INCOME YIELD
4.29%
INCOME YIELD
8.86%
INCOME YIELD
7.52%
INCOME GROWTH
12.40%
INCOME GROWTH
8.76%
INCOME GROWTH
0%
INCOME YIELD = 6.58% (before expenses)
3 YEAR INCOME GROWTH = 7.21%
SOURCE: Grindrod Asset Management
14. Grindrod Managed Growth Fund
South African – Multi-Asset – High Equity
Payers & Growers™
Equities
Payers & Growers™
Listed Property
Fixed Income
65% of portfolio
25% of portfolio
10% of portfolio
INCOME YIELD
4.29%
INCOME YIELD
8.65%
INCOME YIELD
4.82%
INCOME GROWTH
12.48%
INCOME GROWTH
9.85%
INCOME GROWTH
0%
INCOME YIELD = 5.43% (before expenses)
3 YEAR INCOME GROWTH = 11.10%
SOURCE: Grindrod Asset Management
15. Grindrod High Income Fund
South African – Multi-Asset – Income
Payers & Growers™
Equities
Payers & Growers™
Listed Property
Fixed Income
20% of portfolio
80% of portfolio
INCOME YIELD
0%
INCOME YIELD
9.50%
INCOME YIELD
8.05%
INCOME GROWTH
0%
INCOME GROWTH
9.58%
INCOME GROWTH
0%
INCOME YIELD = 8.39% (before expenses)
3 YEAR INCOME GROWTH = 2.04%
SOURCE: Grindrod Asset Management
16. Grindrod Equity Income Growth Fund
South African – Equity – General
Payers & Growers™
Equities
Payers & Growers™
Listed Property
90% of portfolio
10% of portfolio
INCOME YIELD
4.30%
INCOME YIELD
8.39%
INCOME YIELD
0%
INCOME GROWTH
12.47%
INCOME GROWTH
13.51%
INCOME GROWTH
0%
Fixed Income
INCOME YIELD = 4.65% (before expenses)
3 YEAR INCOME GROWTH = 12.19%
SOURCE: Grindrod Asset Management
17. Optimising portfolio objectives with listed property
“Maximising the income produced in those portfolios where
income is a key objective.”
Listed Property Portfolio Yields
10.00
Conservative
Aggressive
9.50
7.00
6.50
10% allocation
7.50
25% allocation
8.00
25% allocation
8.50
20% allocation
9.00
6.00
High Income
SOURCE: I-Net Bridge & Grindrod Asset Management
Stable Growth
Managed Growth
Equity Income Growth
18. Optimising portfolio objectives with listed property
“Maximising the potential for capital growth in those
portfolios where long-term growth is required.”
Listed Property Portfolio Growth Rates
16.00
Conservative
Aggressive
14.00
4.00
2.00
25% allocation
6.00
25% allocation
8.00
20% allocation
10.00
10% allocation
12.00
0.00
High Income
SOURCE: I-Net Bridge & Grindrod Asset Management
Stable Growth
Managed Growth
Equity Income Growth
20. Predictable, growing distributions
“Clients are able to prepare better budgets because their cash
flows are more predictable (don’t rely on capital gains).”
Stable Growth Fund
Managed Growth Fund
High Income Fund
Equity Income Growth Fund
SOURCE: Grindrod Asset Management
23. Grindrod High Income Fund
Monthly returns from 31/05/2012 to 31/10/2013
CUMULATIVE RETURN = 11.37%
WORST MONTH = -0.25%
2.0
1.5
1.0
0.5
0.0
-0.5
06/12
07/12
08/12
09/12
10/12
11/12
SOURCE: I-Net Bridge & Grindrod Asset Management
12/12
01/13
02/13
03/13
04/13
05/13
06/13
07/13
08/13
09/13
10/13
24. Domestic portfolio range
“Maximising the clients chance of beating inflation for a
given level of risk.”
9
8
Grindrod Stable Growth Fund
Grindrod High Income Fund
Initial income yield
7
Grindrod Managed Growth Fund
6
5
INCOME YIELD AND
INCOME GROWTH
BELOW LONG-TERM
INFLATION
4
3
2
Grindrod Equity Income Growth Fund
1
0
0
1
2
3
4
5
6
7
8
Medium-term income growth
SOURCE: Grindrod Asset Management
9
10
11
12
13
14
26. Disclaimer
This presentation has been compiled by Grindrod Asset Management ((Pty) Ltd (‘GrAM’), a wholly owned subsidiary of
Grindrod Financial Holdings Limited. It is confidential and presented as a general information service to the addressee
only and therefore should not be considered to be investment advice. Accordingly, it contains no recommendation
(whether express or implied), guidance, or proposal that any particular security is appropriate to the investment
objectives, financial situation or particular needs of the addressee. Conflicts of interest may exist with any one or more of
the securities recommended in this presentation, which include situations where the author/s of the presentation or a
member of his/her family owns a direct interest in securities issued by a company mentioned, an employee of GrAM acts
as a director of a company mentioned in the presentation, GrAM owns securities in a company mentioned in the
presentation, or GrAM receives compensation for providing financial services to a company mentioned in the
presentation. This presentation shall not be reproduced in whole or in part, without GrAM’s permission. The information
contained herein has been obtained from sources which, and persons whom, we believe to be reliable but is not
guaranteed for accuracy, completeness or otherwise. Any opinions expressed are subject to change without notice. While
care has been taken in the preparation of the information contained in the presentation, GrAM will not be liable for any
loss or damage of any nature arising from this presentation, or incurred as a result of acting on the contents thereof.
Grindrod Asset Management (Pty) Ltd is an Authorised Financial Services Provider (License 29834).
