good on any construction??, page-15

In the meantime if the fonda company is producing a dividend won't the share price of that company also tend to increase? If that is the case then won't we have the opportunity to either keep the shares and keep getting a dividend for an unknown period of time or sell the shares at a premium?

I understand what you are saying here but I take a different view. This is not going to be a yield stock. You can say buy CBA and recieve a good divi. This divi is likely to continue and likely to grow as the business/economy grows. Therefore an investor will happily pay 12, 13, 14 times the div for a share. And when they've had enough they sell a going concern to a willing buyer.

Fonda is not a yield stock in that way. It is like a mining company that has one operating mine. It can pay out a divi but when the ore runs out its all over. No on-going concern, no value to another buyer, just a hole in the gound.

Therefore this is not like the CBA its more like a junk bond. You have to heavily discount because of the risk. The size of the dividend is unknown and but likely to decline over time. There is always the possibility that the yield may be stronger for longer than anyone imagines. But its highly uncertain therefore the applicable multipule will have to be much less.

Let me ask you, and I'm genuine too, a question and I'm happy to get an answer from any reader. Assume ACL Fonda was a stand alone company and available for purchares on the ASX today. It has intends to pay an unfranked dividend of 10c from 30 june 2012. Future dividends depend on the market share of Fonda in the US and Row and the amount of discounting necessary to achieve that share. At the moment there is an AG on the market but no sign of other generics entering the field but it must be assumed that others will eventually follow. The company has no other sources of income now or in the foreseeable future.

Q1 Would you buy that stock?

Q2 How much would you be prepared to pay.