Dividends Explained: Yield, Key Dates and Reinvesting (JSE)
https://themoneymaze.co.za/episodes/dividends-explained-yield-dates-reinvesting/
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0:00 Welcome back to The Minimise, the podcast for South African retail investors who want to stop feeling like they're drowning in jargon and start navigating the markets like someone who actually knows what they're doing. I'm your host J, and today we're talking about one of the juiciest, tastiest parts of investing, dividends. That's right, the corporate equivalent of finding money in your jeans pocket. Except SARS has already had their hands in there too. Dividends are basically accompanies way of saying thanks for lending us your cash.
0:29 By buying our shares. We made a profit. So here's a slice of the pie. It's the investing version of someone bringing a six pack to the bride because you gave them a lift. But let's be clear, not every pump company pays the evidence. Some, like Naspers, prefer to keep reinvesting their profits into growth, acquisitions and probably a few expensive cappuccinos. Others, like your big banks or Xaro when the coal prices are hotter than Durban in February, pay chunky dividends.
0:57 So some companies are like that uncle who always shows up as a bottle of something nice, while the others are stingy cousin who brings nothing and says I'm investing in my future. But so there's more ways than one for a company to dish out some dividends. And you've got cash dividends. It's straight into your easy equities account or whichever app you use. Simple, clean investment equivalent of a borough. It's always satisfying.
1:23 Then you've got special dividends. These are one oaths, usually when a company had a windfall, like when your boss suddenly gives everyone a bonus because sales went through the roof. Don't expect it every year though. This is not a 13th check situation. Then you've got stock dividends instead of cash. You get more shares. It's kind of like when you aren't buys you socks instead of slipping 200 Rand note in an envelope.
1:47 All useful, but it's just not what you hoped for. Then there is this ratio people love to throw around at dinner parties to sound clever. The formula is quite simple. Different yield equals annual, different per share divided by the share price. So if MTN pays 10 Rand per share in dividends and the share trades at about 200 Rand a share, that's a 5% yield. Sounds like a right, but here's the trap. High dividend yield might mean the company share prices tanked. It's like seeing a Bucky was a for sale only 20 Kay Painter on the back window.
2:23 You don't necessarily celebrate, you immediately ask what's wrong with it. There's a few dates though that you must know, otherwise you'll be their Oakley's prize voice without taking the plastic off. So you've got declaration dates. That's when a company says we will be paying a dividend. Then you've got the ex dividend date. This is the cut off by before this date and you get a different buy after. And you've basically bought into the bright after all the chops are gone.
2:52 Record date the day the company checks its shareholder list. Think of it like taking row call and then you've got the payment date, they're happy date, the cash actually lands in your account. This is when you check your easy equities app and small wider than a Lotto winner at checkers. And here's where the real magic happens. If you just cash out dividends and spend them, it's nice. But for the short term, if you reinvest them buying more shares, those shares start paying their own dividends and so on. Over 1020 years, that snowball effect is in normous. It's like starting with one roll of voice and ending up catering a whole rugby club.
3:31 The secret source to building wealth has not cashing out your dividends for pizza. It's plowing them back and letting them do the heavy lifting. It's called compounding. South African companies have some big dividend payers. Banks, Firstrand, Standard Bank, Absa. They love paying dividends. Solid and consistent like your granddad's Sunday roast. Resource companies like Exxaro and the old Anglo American Platinum, currently known as Volterra Platinum.
4:00 These guys pay big when commodity prices are booming and go stingy wind markets slump. They like your mate whose flushing December and then completely broke in January and retailers shopright Mr. Price. Sometimes they do, sometimes stingy but generally reliable. And don't forget ETFs. Funds like the Satrix David Plus ETF focus on companies with strong dividend histories, letting you collect pop and voice from across the JSE in one shot.
4:32 Now I'd love to say difference of free money, but no sauce is already set up camp at the broad table in South Africa. Different withholding taxes 20%. That means for every 100 Rand dividend you'll see 80 Rand sauce gets they've cut faster than your cousin hovering over a bright grabbing the first chop. So the only way around it is with certain tax free accounts like at EFSA or a retirement annuity that can shield you.
4:58 But outside of those expects us to be your silent partner in every dividend you earn. Companies that pay dividends are usually stable, established and not chasing hyper growth. Think banks, insurers, telcos. Growth companies on the other hand don't pay difference because they're reinvesting profits. Think of them as their ambitious cousin who spends every Rand on new business idea and jump contracts. So as an investor you decide do you want dividends now or do you want growth later.
5:30 Both have their place and use your stock fell starter pack of stock lingo for today difference your slice of the company profit types, you get cash which is the bully role special Christmas bonus and stock stocks instead of cash. Dividend yield is dividends divided by the share price. Hi isn't always good dates while you've got the declaration, executive record and payment Mr. Estate and you've got no dividends. Reinvesting equals compounding magic. Don't spend it all on pizza.
6:04 The essay twist While banks, resources, retailers and different ETFs, SARS is always lurking, taking 20% before you even taste divorce. And that's the difference in depth South African style, whether you're in it for the regular layouts or the compounding magic of reinvesting, dividends are the quiet engine of wealth building. And while my jokes may be more dire than actual dare jokes, remember this is not financial advice.
6:31 Please do your own research and speak to a licensed advisor.