On The Astonishing Power of Dividend Growers: Three Case Studies

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One of the best ways to build wealth with equities is to invest in growth stocks. Most growth-oriented generally do not pay any dividends as their focus is on growing. Some of the current popular growth stocks include the likes of Tesla(TSLA), Amazon(AMZN), Nvidia(NVDA), Apple(AAPL), Alphabet(GOOG), Facebook(FB), etc. However the main issue with this strategy is that it is difficult if not impossible to identity the growth superstars when they were young. Besides many of these mega growth stars were dead money for a few years while they struggled with competition or directions when they were much smaller. For example, Apple was abandoned by investors many times and left for dead years ago. Similarly Amazon was a money loser and never made any profit for years and years during and after the dot com bubble. The number of investors that held these companies thru all those years is probably very small. In addition, growth stocks can stop growing at any time or can even go bankrupt.

So the next best strategy to generate excellent returns over the long-term is to invest in dividend-paying stocks and reinvesting the dividends. Even better is to go with dividend growers. Companies that consistently grow their dividend payouts year after year are ideal to build wealth due to the effect of compounding.

I came across an excellent article that showed the power of dividend growers using three world-class companies as examples. From the article by Caroline Randall at Capital Group:

Our interactive chart shows the returns for hypothetical $100,000 investments in three historically consistent dividend growers — McDonald’s, Nestlé and Samsung — for the 20 years ended December 31, 2021. Toggle by company and year-end results to see how those initial investments would have fared over the two decades, with all dividends reinvested.

Growth of $100K over 20 years – McDonald’s (MCD):

Samsung:

Nestle (NSRGY):

Note: For an interactive version of the charts please visit the linked article.

Source: What $100k could have become in 20 years, Capital Group

The original investment of $100K in McDonald’s (MCD) would have grown to nearly $1.1 Million in 20 years and 40% of that growth came from just reinvested dividends. This is fascinating indeed.

Disclosure: No positions

10 Years of Global EV Sales by Country: Infographic

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I came across the below interesting infographic on EV sales by country in the past decade. China has hundreds of companies making hundreds of EV models. EV sales has also soared there in recent years. US and Europe are yet to catch up with China. Despite incentives and high gas prices, the US is behind Europe in EV adoption.

Click to enlarge

Source: Visual Capitalist via Market Index

Industry giant Tesla(TSLA) remains the leader in the electric auto market in the US with its models dominating the top selling EVs.

Disclosure: No positions

S&P 500 Bull and Bear Markets From 1940 to June 2022: Chart

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The US equity market has dramatically recovered from the depths of the bear market reached in June this year. As of yesterday, the S&P 500 is down just over 10%. Despite the amazing run in recent weeks, not many investors are convinced that the bear is dead for a variety of reasons. Irrational exuberance by investors on some weak reading of inflation figures for last month is the main driving force behind the run up. The following are just a handful of factors that are indicative of a bear market than a bull market:

  • Though oil prices are falling they are still high.
  • Inflation is still high in many areas especially in groceries.
  • The Russia-Ukraine war is still on. The war that was to be the trigger for WW III is not over almost overnight with Russia defeated.
  • The proverbial throwing of the towel and avoid stocks like the plague has not happened yet. Investors are still excited with market movements and past manias such as the one with meme stocks is still on.
  • Pandemic excesses have not dissipated in many sectors of the market.

With that brief over the below chart from BT shows the bull and bear markets in the S&P 500 from 1940 thru June, 2022:

Click to enlarge

Source: Market Insights, Bull and Bear, July 2022, BT

Related ETF:

  • SPDR S&P 500 ETF Trust (SPY)

Disclosure: No Positions

PetroChina to Delist ADRs from NYSE

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Chinese oil giant PetroChina Company Limited (PTR) has announced plans to delist its American Depository Receipts from the NYSE. Some of the reasons for this action include listing fees and low trading volume. The last day the ADR may trade on the NYSE is on or around Sept 8, 2022. Below are the complete details from press release:

Aug 12, 2022 (ACCESSWIRE via COMTEX News Network) — BEIJING, CHINA / ACCESSWIRE / August 12, 2022 / PetroChina Company Limited(the ‘Company’) (HKSE stock code 0857; NYSE:PTR; SSE stock code 601857) today announced that it has notified the New York Stock Exchange (the ‘NYSE’) on 12 August 2022 (Eastern Timein the U.S.) that it will apply for a voluntary delisting of its American Depositary Shares (‘ADSs’) from the NYSE pursuant to the U.S. Securities Exchange Act of 1934, as amended (the ‘Exchange Act’) and relevant rules.

In 2000, the Company completed an offering of 17,582,418,000 H shares of the Company (the ‘H Shares’) and became listed on The Stock Exchange of Hong Kong Limited (the ‘HKSE’) and the NYSE, whereby, ADSs representing 23.5% of the total H Shares were listed on the NYSE. In 2005, the Company completed a followâ?’on offering of over 3 billion H Shares. In 2007, the Company issued 4 billion A shares of the Company and became listed on the Shanghai Stock Exchange (the ‘SSE’).As of 9 August 2022, the issued and outstanding ADSs represented approximately 3.93% of the total H Shares and approximately 0.45% of the total share capital of the Company.

Based on a comprehensive evaluation of a number of considerations, including but not limited to the small percentage of H Shares represented by ADSs as compared to the total number of the H Shares and the total share capital of the Company, the relatively limited trading volume of the ADSs as compared to the trading volume of the H Shares on a worldwide basis, the considerable administrative burden for performing the disclosure obligations as necessary for maintaining the listing of the ADSs on the NYSE as a result of the differences in the regulatory rules of multiple listing venues, the fact that the Company has never utilized NYSE for any follow-on financing, while the HKSE and the SSE are strong alternatives for the Company because they can satisfy the Company’s fundraising requirements necessary for its normal business operations, and for better protection of the interests of the investors, the board of directors of the Company approved the delisting of the ADSs from the NYSE and, subject to subsequent actual circumstances, the deregistration of the ADSs and the underlying H Shares with the United States Securities and Exchange Commission (the ‘SEC’) in accordance with the relevant requirements under the Exchange Act.

Based on the foregoing, the Company intends to file a Form 25 with the SEC on or about 29 August 2022 to delist its ADSs from the NYSE. The delisting of the ADSs from the NYSE is expected to become effective ten days thereafter. The last day of trading of the ADSs on the NYSE is expected to occur on or about 8 September 2022. From and after that, the ADSs will no longer be listed on the NYSE. However, the Company will continue to perform its disclosure obligations under the Exchange Act until the Company files a Form 15F with the SEC to seek the deregistration of the ADSs and the underlying H Shares under the Exchange Act after it meets the criteria for deregistration under Rule 12h-6.

On the date of this announcement, the Company will instruct The Bank of New York Mellon, the depositary of the ADSs, to issue the notice of terminating its American Depositary Receipt (‘ADR’) program to the holders of ADSs according to the requirements under the depositary agreement, and the ADR program will be terminated on or around 16 October 2022 (the ‘Termination Date’). During the period after the ADSs are delisted from the NYSE and before the Termination Date, the ADSs issued under the ADR program of the Company are expected to trade on the over-the-counter market.

Source: PetroChina Announced Intention to Delist the American Depositary Shares from the NYSE, PetroChina via BNY Mellon

Related:

What delisting Chinese ADRs from US exchanges does and doesn’t mean for investors, Fidelity

Analysis: China investors hedge U.S. delisting risk with Hong Kong play, Reuters

What delisting Chinese ADRs from US exchanges does and doesn’t mean for investors, Fidelity

What will happen to my Chinese shares if they are delisted?, Hatch Invest

Disclosure: No positions

Five Chinese State-Owned Companies To Delist from New York Stock Exchange

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Five Chinese state-owned companies have announced plans to delist their ADSs from the NYSE. This is another blow for US investors holding these ADSs. Investors have to monitor the developments in the next few days and weeks and take action accordingly. Below is an excerpt from a journal article:

Five Chinese state-owned companies said they intend to delist their American depositary shares from the New York Stock Exchange, as financial regulators in Beijing and Washington remain at loggerheads over U.S. audit requirements.

In separate filings to Hong Kong’s stock exchange Friday, PetroChina Co., PTR -1.65%▼ China Petroleum & Chemical Corp., SNP -1.80%▼ Aluminum Corp. of China Ltd., ACH -0.76%▼ China Life Insurance Co.,  LFC -1.46%▼ and Sinopec Shanghai Petrochemical Co SHI -1.06%▼. said they have notified the NYSE that they plan to voluntarily delist their American depositary shares.

The companies pointed to limited trading volumes of their U.S. securities, and the administrative burden and costs of maintaining their New York listings. They said they would apply later this month to delist, and the last day of trading of their shares on U.S. exchanges would be in early September. 

Source: Five Chinese Companies Say They Plan to Delist From the New York Stock Exchange, WSJ, Aug 12, 2022

More than 250 Chinese firms are listed on US exchanges. Almost all of them face the risk of delisting due to the The Holding Foreign Companies Accountable Act of 2020.

Last year oil major CNOOC Ltd , China Telecom Corp. and China Mobile Ltd. delisted from the US exchanges.

The chart below the returns of the five ADRs planning to delist from NYSE:

Click to enlarge

Source: Yahoo Finance

I will soon post an article on the options available for holders of these Chinese ADRs.

Disclosure: No positions