₦airaland Forum

Hi

jonnysessy:
Good day sir, I really thought i should comment on this post. Though, I like the idea of taking loan to buy shares. But, i guess I have not reached that level. I also know that if you really want to hit it big in life, you just have to take a big risk. But, my knowledge and level in stock business is still in the amateur level. I am yet to get a foolproof of 5 different stocks that I will pick today to generate 300% percent in the next 5 years. But, i am actually learning the ropes and doing the best I can do with my own funds.

The area I am actually going is where you said that a portfolio of N170m should generate about N30m. Before I ventured into stock I got information that I can conveniently get 10% from dividend. But, in my several years in the NGX I doubt if I had made 5% in dividend worth of my portfolio. I have studied this trend and most stocks only pay between 5 - 8 % dividend of the portfolio worth. From your assertion i am wondering if am in the wrong stocks. I try so much to invest in dividend paying stocks. Though, I still have some that I buy only for capital appreciation. Which means if my portfolio is worth N85m , I should be smiling to the bank with N15m dividend per annum. I don't think this is realistic or I am in the wrong stocks. Most stocks that pays that 6 - 8 % worth of the portfolio belongs to the banking sectors. The worst are like Transcorp Power, Geregu power, Transcorp, UACN etc

I didn't say a portfolio of N170 million should generate a dividend of N15 million.


It is my personal risk management policy that my total loans are not more than twice or thrice of the dividend income I am expecting from the portfolio .


So if I have a portfolio of N100 million that gave me a dividend of N7 million last year and will give a dividend of N8 million in 2025, if I want to apply for a loan now, I apply for N16 million to N24 million

emmanuelewumi:
They do through their sister company called Orange One Finance Limited

Loan is for a year and bullet payment of principal and interest at maturity. Just that their interest rate is high at 33%. Another problem is that they only give a maximum loan of N20 million

So if you get a loan of N10 million at 33% per annum for a year

You will pay a lump sum of N13.3 million at maturity.


Not bad sha if you use the loan for business.

Not bad.

Can i roll-over the loan at maturity like Ucee?
For biz, i prefer to use the loan to be buying shares i sight at a good price while payback with my cashflow (salary).
It allows me not losing out buying good stocks at good price.

emmaodet:
Not bad.

Can i roll-over the loan at maturity like Ucee?
For biz, i prefer to use the loan to be buying shares i sight at a good price while payback with my cashflow (salary).
It allows me not losing out buying good stocks at good price.

I have never rolled over Orange One Finance loans,because of the high interest rate, I always liquidate it before maturity.


But I think you should be able to rollover if you pay the accumulated interest when the loan matures

emmanuelewumi:
I have never rolled over Orange One Finance loans,because of the high interest rate, I always liquidate it before maturity.


But I think you should be able to rollover if you pay the accumulated interest when the loan matures

Omo that would be too much cost

I no fit do past 6 months. I prefer 2-3 months for momentum trading

Agbalowomeri:
Omo that would be too much cost

I no fit do past 6 months. I prefer 2-3 months for momentum trading

It is dangerous, because you did 100%.


Assuming your portfolio is valued at N100 million, that means you took a loan of N100 million.

The earlier one pays off the better.

That type of loan is allowed if you have insiders information that is 100% legit

emmanuelewumi:
Hi


I didn't say a portfolio of N170 million should generate a dividend of N15 million.


It is my personal risk management policy that my total loans are not more than twice or thrice of the dividend income I am expecting from the portfolio .


So if I have a portfolio of N100 million that gave me a dividend of N7 million last year and will give a dividend of N8 million in 2025, if I want to apply for a loan now, I apply for N16 million to N24 million

Okay, i now get it. Thanks for taking time to explain it further. I really appreciate your time sir.

emmanuelewumi:
How many banks can deliver a return on Invested capital of 30%, None. We have some non banking stocks delivering return on Invested capital of 50% to 60%.

Some businesses are making accounting profits while some are creating wealth the produce EVA Economic Value Added, such business generate economic profits.

Majority of these companies making 50 to 60 % on invested capital their dividend yield in most cases is not better than the dividend yields for banks like Zenith, GTBANK, Access,UBA and Fidelity.

The same companies still depend on Nigerian premium banks for loans.Most state government in Nigeria still depend on Nigerian banks for loans.The Nigerian banks are directly or indirectly running the economy. There can never be a growing Nigerian economy without the premium banks.

jonnysessy:
Good day sir, I really thought i should comment on this post. Though, I like the idea of taking loan to buy shares. But, i guess I have not reached that level. I also know that if you really want to hit it big in life, you just have to take a big risk. But, my knowledge and level in stock business is still in the amateur level. I am yet to get a foolproof of 5 different stocks that I will pick today to generate 300% percent in the next 5 years. But, i am actually learning the ropes and doing the best I can do with my own funds.

The area I am actually going is where you said that a portfolio of N170m should generate about N30m dividend per annum. Before I ventured into stock I got information that I can conveniently get 10% from dividend. But, in my several years in the NGX I doubt if I had made 5% in dividend worth of my portfolio. I have studied this trend and most stocks only pay between 5 - 8 % dividend of the portfolio worth. From your assertion i am wondering if am in the wrong stocks. I try so much to invest in dividend paying stocks. Though, I still have some that I buy only for capital appreciation. Which means if my portfolio is worth N85m , I should be smiling to the bank with N15m dividend per annum. I don't think this is realistic or I am in the wrong stocks. Most stocks that pays that 6 - 8 % worth of the portfolio belongs to the banking sectors. The worst are like Transcorp Power, Geregu power, Transcorp, UACN etc

Avoid taking loans to buy SHARES. Know this and enjoy peace of mind

This is my personal opinion

EDUECO:
Majority of these companies making 50 to 60 % on invested capital their dividend yield in most cases is not better than the dividend yields for banks like Zenith, GTBANK, Access,UBA and Fidelity.

The same companies still depend on Nigerian premium banks for loans.Most state government in Nigeria still depend on Nigerian banks for loans.The Nigerian banks are directly or indirectly running the economy. There can never be a growing Nigerian economy without the premium banks.

I am sorry you don't have a good understanding of the concept of Return on Invested Capital.

The huge liabilities of banks will reduce the ROIC

It is also a highly regulated industry, meaning they can't just increase their fees, interest rates etc

How many banks can actually payout 40% of their EPS as dividends?


By the way, I still have shares of Access, UBA and Zenith

emmanuelewumi:
It is dangerous, because you did 100%.


Assuming your portfolio is valued at N100 million, that means you took a loan of N100 million.

The earlier one pays off the better.

That type of loan is allowed if you have insiders information that is 100% legit

If your TA is good and you can identify a momentum trade, 20-30% target is easy and you go pocket 15%. Almost all the time I end up with over 30% profit on the loan

Agbalowomeri:
If your TA is good and you can identify a momentum trade, 20-30% target is easy and you go pocket 15%. Almost all the time I end up with over 30% profit on the loan

Good.

Instead of liquidating your loan, you should just identify another opportunity

EDUECO:
Majority of these companies making 50 to 60 % on invested capital their dividend yield in most cases is not better than the dividend yields for banks like Zenith, GTBANK, Access,UBA and Fidelity.

The same companies still depend on Nigerian premium banks for loans.Most state government in Nigeria still depend on Nigerian banks for loans.The Nigerian banks are directly or indirectly running the economy. There can never be a growing Nigerian economy without the premium banks.

But banks will not give you the number of baggers these companies will give you

emmanuelewumi:
Good.

Instead of liquidating your loan, you should just identify another opportunity

Ahh iro o

Whenever I make a kill in stock market, I first run away before the feeling of invincibility sets in Lol. I have mastered my own emotions

Agbalowomeri:
Ahh iro o

Whenever I make a kill in stock market, I first run away before the feeling of invincibility sets in Lol. I have mastered my own emotions

O ti e le. You no rugged at all. Na mouth you get

Agbalowomeri:
But banks will not give you the number of baggers these companies will give you

A bi ooo

Agbalowomeri:
But banks will not give you the number of baggers these companies will give you

UBA and FIRSTHOLDCO have delivered more than 12 baggers.

Fidelity Bank has delivered more than 20 baggers.

WEMA Bank has delivered more than 40 baggers.

Zenith Bank has delivered more than 5 baggers.

FCMB has delivered more than 4 baggers

GTBANK has delivered more than 2.5 baggers.

emmanuelewumi:
O ti e le. You no rugged at all. Na mouth you get

Lol the market don level those ones wey rugged. Me na money I come snatch from Mr. Market.

EDUECO:
UBA and FIRSTHOLDCO have delivered more than 12 baggers.

Fidelity Bank has delivered more than 20 baggers.

WEMA Bank has delivered more than 40 baggers.

Zenith Bank has delivered more than 5 baggers.

FCMB has delivered more than 4 baggers

GTBANK has delivered more than 2.5 baggers.

They are all a one-off devaluation effect

From 2005 to 2022, how many banks have done 2 baggers in 17 years?

EDUECO:
UBA and FIRSTHOLDCO have delivered more than 12 baggers.

Fidelity Bank has delivered more than 20 baggers.

WEMA Bank has delivered more than 40 baggers.

Zenith Bank has delivered more than 5 baggers.

FCMB has delivered more than 4 baggers

GTBANK has delivered more than 2.5 baggers.

15 years to 20 years delivery is better

I will send the screenshot when I have access to CSCS online, the network is currently bad

emmanuelewumi:
I am sorry you don't have a good understanding of the concept of Return on Invested Capital.

The huge liabilities of banks will reduce the ROIC

It is also a highly regulated industry, meaning they can't just increase their fees, interest rates etc

How many banks can actually payout 40% of their EPS as dividends?


By the way, I still have shares of Access, UBA and Zenith

I have a good understanding of ROIC. Most Nigerian premium banks return on invested capital is not less than 10%.And 10% is a good one.

The CBN's regulation is why I still have confidence in the well managed banks.This regulation will prevent them from going bankrupt.

The low payout rate has helped them in growing their shareholder's funds. Their dividend yields are still good despite the low payout rate .

emmanuelewumi:
15 years to 20 years delivery is better

I will send the screenshot when I have access to CSCS online, the network is currently bad

8 to 10 year delivery is still okay.

megawealth01:
Avoid taking loans to buy SHARES. Know this and enjoy peace of mind

This is my personal opinion

Thanks Megawealth01. I really don't intend to take loan for buying of shares. I have never being able to predict my return on investment. But my gains are actually greater than my losses. I only strictly invest with my personal funds.

Agbalowomeri:
They are all a one-off devaluation effect

From 2005 to 2022, how many banks have done 2 baggers in 17 years?

The dividends have been consistent.

EDUECO:
I have a good understanding of ROIC. Most Nigerian premium banks return on invested capital is not less than 10%.And 10% is a good one.

The CBN's regulation is why I still have confidence in the well managed banks.This regulation will prevent them from going bankrupt.

The low payout rate has helped them in growing their shareholder's funds. Their dividend yields are still good despite the low payout rate .

10% is not a good one in Nigeria.

The discount rate for Naira denominated asset is 20%


The difference between the ROIC and the discount rate of 20% multiplied by the Invested Capital will give you the Economic Value Advantage

Assuming a stock has equity of N30 billion and debt of N20 billion. The invested capital is N50 billion

If the Net Operating profit after tax is N20 billion...

The ROIC is 40%.

The economic value added or economic profit will be (40%-20%) multiplied by N50 billion

Which will give an economic profit of N10 billion.

If the ROIC is 10% for a Naira denominated asset, it will make a negative economic profit even though it made accounting profit. Thereby destroying value


Long term wealth creation ability of a stock is in the creation of Economic Value Advantage or economic profit

EDUECO:
8 to 10 year delivery is still okay.

Investment is a marathon, average business cycle is about 5 years.

Better to look at 3 business cycles to determine the long term return.


So we will compare returns from 2010 to 2025

Agbalowomeri:
They are all a one-off devaluation effect

From 2005 to 2022, how many banks have done 2 baggers in 17 years?

Fidelity,Wema,Access,Zenith and GTBANK have done more than 2.5 baggers

📍

emmanuelewumi:
10% is not a good one in Nigeria.

The discount rate for Naira denominated asset is 20%


The difference between the ROIC and the discount rate of 20% multiplied by the Invested Capital will give you the Economic Value Advantage

Assuming a stock has equity of N30 billion and debt of N20 billion. The invested capital is N50 billion

If the Net Operating profit after tax is N20 billion...

The ROIC is 40%.

The economic value added or economic profit will be (40%-20%) multiplied by N50 billion

Which will give an economic profit of N10 billion.

If the ROIC is 10% for a Naira denominated asset, it will make a negative economic profit even though it made accounting profit. Thereby destroying value


Long term wealth creation ability of a stock is in the creation of Economic Value Advantage or economic profit

emmanuelewumi:
They do through their sister company called Orange One Finance Limited

Loan is for a year and bullet payment of principal and interest at maturity. Just that their interest rate is high at 33%. Another problem is that they only give a maximum loan of N20 million

So if you get a loan of N10 million at 33% per annum for a year

You will pay a lump sum of N13.3 million at maturity.


Not bad sha if you use the loan for business.

Pa Emma, I'm Just curious if you would rather take the loan term you explained above, where you pay a lump sum at maturity. Compared to an interest free loan that is ammortized monthly over a year.
If you factor in the TVM and opportunity cost involved in a bull run we currently have.

emmanuelewumi:
That is the share capitalization history of GTB.

You got bonus of 1 for 4 on two occasions

Growing to shares to about 41,000.

You also know that 2007 was around the time when stocks were at an All Time High prices that their fundamentals could not support

Average PE ratio in the banking sector was over 20

An investment of ₦1,000,000 in GTBank shares at a price of ₦37 per share in 2007 would have yielded 27,027 units. After accounting for all subsequent bonus issues, the total holding would stand at approximately 113,613 units today.

Extending the analysis further back to 2004, when the share price was ₦17, the same ₦1,000,000 investment would have secured 58,823 units. With bonuses included, this position would have grown to approximately 3,676,438 units as of today.

Despite the growth in units, the overall performance does not appear particularly impressive when evaluated against alternative investment opportunities.

emmanuelewumi:
How many banks can deliver a return on Invested capital of 30%, None. We have some non banking stocks delivering return on Invested capital of 50% to 60%.

Some businesses are making accounting profits while some are creating wealth the produce EVA Economic Value Added, such business generate economic profits.

Return on Invested Capital is a function of capital base, and then the return.

Some businesses (like software businesses) have very low capital requirement but can generate incremental returns on that small capital. That's gold.

But there are also things we need to consider when looking at such businesses, which is durable moat and a very long favorable runway ahead.

Most businesses like the software business, that have high ROIC have very weak moats and hence a short runway or one that's not favorable.

What would you say about such businesses?

NettyNelly:
Return on Invested Capital is a function of capital base, and then the return.

Some businesses (like software businesses) have very low capital requirement but can generate incremental returns on that small capital. That's gold.

But there are also things we need to consider when looking at such businesses, which is durable moat and a very long favorable runway ahead.

Most businesses like the software business, that have high ROIC have very weak moats and hence a short runway or one that's not favorable.

What would you say about such businesses?

Consider the gross margin. Businesses with a high gross margin have a strong moat.

You can also consider comparing the gross Profit with the total asset of the business

over 20% is fair

Agbalowomeri:
Lol the market don level those ones wey rugged. Me na money I come snatch from Mr. Market.

Some people come play casino