divs must be based on earnings not sp

Extract from article in today's AGE. The VMG board have stated the 10c divs will be maintained. i bought in at 1.79 and expect they will keep their word. Current SP is not the issue.... its earnings.

AGE:One consequence of share prices falling but dividends remaining intact — so far, at least — is that dividend yields have skyrocketed, backing the argument that cuts to dividends will merely return yields to their previous level.

It is an argument challenged by Eley Griffiths Group portfolio manager Brian Eley, who said the high yields were illusory.

"For example, company A was trading at $1 and a 10 per cent yield and is now trading at 40¢ and a notional 25 per cent yield, and the directors are saying 'well, that's ridiculous, we can't be trading on a 25 per cent yield'," he said.

"What they miss is that the only people who get a 25 per cent yield are those coming in today. People who paid $1 for their shares six or 12 months ago are still entitled to the yield they thought they were going to get. Just because the nominal yield looks awry doesn't mean it shouldn't be paid if it can be paid."

Mr Eley said his attitude was "if you can pay a dividend, you should" and that the market was unlikely to be sympathetic to companies that wound back distributions.

"You don't have to be an investor in any one particular stock, so if anyone shows any signs of weakness and cracks, they will get the same sort of treatment that they would have at any other time."