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THE BENEFITS & POTENTIAL OFPAYERS & GROWERS™November 2013
INTRODUCING PAYERS & GROWERS™
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
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
SOURCE: I-Net Bridge & Grindrod Asset Management
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13f '14f '15f0
2000
4000
6000
8000
10000
12000
14000
16000
0
100
200
300
400
500
600
700
Standard Bank (SBK)
Dividends per share (RHS) Share price (LHS)
Share prices rise as earnings/dividends rise
“Capital growth is a function of earnings/dividend growth. Businesses become more valuable as their profits rise.”
Payers & Growers™ equity portfolio
AVI BIDVEST
BRITISH AMERICAN TOBACCO
CORONATION
FIRSTRAND
INVESTEC PLC
LIBHOLD
LIFE HEALTHCARE
MMI HLDGSMR PRICEMTNOLD MUTUAL
REUNERT
SAB MILLER
STANDARD BANK
SASOL
SPAR
TIGER BRANDS
TRUWORTHSVODACOM
“A portfolio of businesses that reward shareholders with consistent growth in earnings & dividends.”
Equal weighting – a disciplined approach to investing
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
Each security enjoys an equal weight in the equity portfolio
SOURCE: Grindrod Asset Management
Listed property – the ultimate Payers & Grower™?
SOURCE: Grindrod Asset Management & Forbes
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
Diversification benefits of listed property
SOURCE: I-Net Bridge & Grindrod Asset Management
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)
COMPARATIVE TOTAL RETURN INVESTMENT CORRELATION
Diversification benefits of listed property
SOURCE: I-Net Bridge & Grindrod Asset Management
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec-15
-10
-5
0
5
10
15 Monthly Returns - 2008
100% Equities 50% Equities / 50% Listed Property
“Listed property provides significant diversification benefits due to its lower volatility and high absolute returns.”
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
APPLYING PAYERS & GROWERS™
Grindrod Stable Growth FundSouth African – Multi-Asset – Low Equity
Payers & Growers™ Equities
Payers & Growers™ Listed Property
Fixed Income
SOURCE: Grindrod Asset Management
INCOME YIELD = 6.58% (before expenses)
3 YEAR INCOME GROWTH = 7.21%
INCOME YIELD4.29%
INCOME GROWTH12.40%
40% of portfolio
INCOME YIELD8.86%
INCOME GROWTH8.76%
25% of portfolio
INCOME YIELD7.52%
INCOME GROWTH0%
35% of portfolio
Grindrod Managed Growth FundSouth African – Multi-Asset – High Equity
Payers & Growers™ Equities
Payers & Growers™ Listed Property
Fixed Income
SOURCE: Grindrod Asset Management
INCOME YIELD = 5.43% (before expenses)
3 YEAR INCOME GROWTH = 11.10%
INCOME YIELD4.29%
INCOME GROWTH12.48%
65% of portfolio
INCOME YIELD8.65%
INCOME GROWTH9.85%
25% of portfolio
INCOME YIELD4.82%
INCOME GROWTH0%
10% of portfolio
Grindrod High Income FundSouth African – Multi-Asset – Income
INCOME YIELD0%
INCOME GROWTH0%
Payers & Growers™ Equities
Payers & Growers™ Listed Property
Fixed Income
SOURCE: Grindrod Asset Management
INCOME YIELD = 8.39% (before expenses)
3 YEAR INCOME GROWTH = 2.04%
INCOME YIELD9.50%
INCOME GROWTH9.58%
20% of portfolio
INCOME YIELD8.05%
INCOME GROWTH0%
80% of portfolio
SOURCE: Grindrod Asset Management
Grindrod Equity Income Growth FundSouth African – Equity – General
Payers & Growers™ Equities
Payers & Growers™ Listed Property
Fixed Income
INCOME YIELD0%
INCOME GROWTH0%
INCOME YIELD = 4.65% (before expenses)
3 YEAR INCOME GROWTH = 12.19%
INCOME YIELD4.30%
INCOME GROWTH12.47%
90% of portfolio
INCOME YIELD8.39%
INCOME GROWTH13.51%
10% of portfolio
SOURCE: I-Net Bridge & Grindrod Asset Management
High Income Stable Growth Managed Growth Equity Income Growth6.00
6.50
7.00
7.50
8.00
8.50
9.00
9.50
10.00
Listed Property Portfolio Yields
Optimising portfolio objectives with listed property
20%
allo
cati
on
25%
allo
cati
on
25%
allo
cati
on
10%
allo
cati
on
“Maximising the income produced in those portfolios where income is a key objective.”
Conservative Aggressive
SOURCE: I-Net Bridge & Grindrod Asset Management
High Income Stable Growth Managed Growth Equity Income Growth0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
Listed Property Portfolio Growth Rates
Optimising portfolio objectives with listed property
“Maximising the potential for capital growth in those portfolios where long-term growth is required.”
20%
allo
cati
on
25%
a
lloc
atio
n
25%
allo
cati
on
10%
allo
cati
on
Conservative Aggressive
BENEFITS OF PAYERS & GROWERS™
Predictable, growing distributions
Stable Growth Fund Managed Growth Fund
High Income Fund Equity Income Growth Fund
SOURCE: Grindrod Asset Management
“Clients are able to prepare better budgets because their cash flows are more predictable (don’t rely on capital gains).”
SOURCE: I-Net Bridge & Grindrod Asset Management
06/12 07/12 08/12 09/12 10/12 11/12 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13-2
-1
0
1
2
3
4
5
6
Grindrod Stable Growth FundMonthly returns from 31/05/2012 to 31/10/2013
CUMULATIVE RETURN = 27.13%
WORST MONTH = -1.44%
SOURCE: I-Net Bridge & Grindrod Asset Management
Grindrod Managed Growth FundMonthly returns from 31/05/2012 to 31/10/2013
CUMULATIVE RETURN = 36.30%
WORST MONTH = -1.99%
06/12 07/12 08/12 09/12 10/12 11/12 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13-4
-2
0
2
4
6
8
SOURCE: I-Net Bridge & Grindrod Asset Management
Grindrod High Income FundMonthly returns from 31/05/2012 to 31/10/2013
CUMULATIVE RETURN = 11.37%
WORST MONTH = -0.25%
06/12 07/12 08/12 09/12 10/12 11/12 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13-0.5
0.0
0.5
1.0
1.5
2.0
Domestic portfolio range
1 2 3 4 5 6 7 8 9 10 11 12 13 140
1
2
3
4
5
6
7
8
9
Medium-term income growth
Init
ial i
nc
om
e y
ield
Grindrod High Income Fund
Grindrod Stable Growth Fund
Grindrod Managed Growth Fund
Grindrod Equity Income Growth Fund
SOURCE: Grindrod Asset Management
INCOME YIELD AND INCOME GROWTH
BELOW LONG-TERM INFLATION
“Maximising the clients chance of beating inflation for a given level of risk.”
Questions
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).
Disclaimer