Great article. It would be helpfull to know what the dividend yield is on current price and average price over last year or so. It seems this is a mature business growing in line with inflation/long term growth rate in World economy and pretty much paying all it can in dividends.
That being the case it would require a dividend yield significantly above 10 year Government bond rate to be worth buying. Or a possibility of getting there?
Secondly price is at all time high or close to it although in nominal and not in real terms probably buoyed by increased demand from oil sector. Does that make in that sense a higher risk stock depending on how oil sector performs.
The dividend yield as it stands is about 5%. I wouldn't want to compare the dividend yield to the 10-year bond to make the decision and here is why:
(a) Dividend presented by the company today is only about 50% of the profits generated (averaged over 5 year basis), so there is ample more profits being reinvested into the business. If the Management's strategic efforts were to even partially materialise, that would mean higher profitability in the future.
(b) Even if payout ratio and reinvestment were to be kept aside for a minute, the business has been returning ever-increasing dividend (compounding roughly at 9% over the past 10+ years) - this is a benefit you won't get with a government bond.
Regarding your oil sector question, reading the annual report, the exposure is widely to the commodities basket. Roughly 50+% (USD 2,044M of the total of USD 3,832M) came from the segment "Mineral Resources, Energy, Chemical & Electronics". Given that I have little exposure to Commodities and Oil, and given that investment in some parts of that industry has been lagging behind for years, I am comfortable with the exposure I get through Sumitomo. In fact it might be one of the safest, lowest-delta ways of playing the commodity bull thesis.
I am personally not worried about price. As it stands, it is pretty reasonably priced. Even if there were to be some pullback, if the management continues to deliver (at the modest rates they have been), I will likely add to my position and average it out.
Great article. It would be helpfull to know what the dividend yield is on current price and average price over last year or so. It seems this is a mature business growing in line with inflation/long term growth rate in World economy and pretty much paying all it can in dividends.
That being the case it would require a dividend yield significantly above 10 year Government bond rate to be worth buying. Or a possibility of getting there?
Secondly price is at all time high or close to it although in nominal and not in real terms probably buoyed by increased demand from oil sector. Does that make in that sense a higher risk stock depending on how oil sector performs.
The dividend yield as it stands is about 5%. I wouldn't want to compare the dividend yield to the 10-year bond to make the decision and here is why:
(a) Dividend presented by the company today is only about 50% of the profits generated (averaged over 5 year basis), so there is ample more profits being reinvested into the business. If the Management's strategic efforts were to even partially materialise, that would mean higher profitability in the future.
(b) Even if payout ratio and reinvestment were to be kept aside for a minute, the business has been returning ever-increasing dividend (compounding roughly at 9% over the past 10+ years) - this is a benefit you won't get with a government bond.
Regarding your oil sector question, reading the annual report, the exposure is widely to the commodities basket. Roughly 50+% (USD 2,044M of the total of USD 3,832M) came from the segment "Mineral Resources, Energy, Chemical & Electronics". Given that I have little exposure to Commodities and Oil, and given that investment in some parts of that industry has been lagging behind for years, I am comfortable with the exposure I get through Sumitomo. In fact it might be one of the safest, lowest-delta ways of playing the commodity bull thesis.
I am personally not worried about price. As it stands, it is pretty reasonably priced. Even if there were to be some pullback, if the management continues to deliver (at the modest rates they have been), I will likely add to my position and average it out.
Hope this helps.