News: IFL IOOF says as at Dec 31, 2015, funds under management, administration, advice and..., page-11

Carrying on:

By definition correlation is not causation. But the correlation between share prices and dividends rises considerably when divs exceed a certain level. In times of high growth in the mkt index eg 2004 to 2007 (inclusive).... SPs rose whether divs did, or not. Some companies paid zero or very low divs, yet SPs doubled or more.

But today we have low inflation and the ASX index is back at levels seen several years ago. In this environment high dividend yields are much more likely to influence SP. What is a 'high yield'? Ten years ago a high yield (gross) was 6%. With a some exceptions, consistent yields of this dimension where confined to the banks.

Today (assuming divs into FY16 are maintained) some banks will yield almost 10%. This is extraordinary in such a low inflation situation. It raises the question: If bank deposits yield just 1.5 -2.9% why, with a yield at 10%, are SPs of banks not higher? We all know the answer.

But company's with good growth prospects and a yield above a certain level are likely (in my estimation) to see buyers push SPs higher. In 2016 what yield level is required to significantly influence a SP? I reckon anything at/above 8% has a bearing. At/above 10% and the influence rises considerably.

Takeaway: Look for combination of highish/high gr yields, along with a company whose earnings you feel are sustainable. Are their any right now? Well, IFL at $8.00 (using my FY16 estimates above) will pay a gross yield of 9.76%. Raise the div by one cent and you hit the magic 10% mark.