RMS 3.05% $1.86 ramelius resources limited

market revaluation 75 cents.

  1. 5,245 Posts.
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    After some thought over the last couple of days I realize I have under estimated the market correction.
    The effect of inflation will have a further impact on global sharer prices than I first thought.

    When interest rates rise and the market converts to cash investors will likely be achieving 4 to 5% return.
    Typically the market trades with expectations of 3% dividend above the bank rate.

    Here is the issue
    Typically the bank rate would be 3%,
    The ASX 200 stock would provide 6% to 9% return which would cover three factors which are growth, inflation and risk. The growth of 3%, inflation of about 2%, risk 3% to 5% of holding a volatile growth investment.

    What is different now.
    Resources are at an all time high, inflation is high, return on investment is low and we are approaching a recession, interest rates are rising.
    High inflation will impact the demand of investors for higher dividends in the asx.
    I was originally only looking at the impact of the bank rate increases effect on dividend demands. This will help explain why BHP is providing 12% return and the market is not valuing them higher. High Inflation will play a larger role in effecting company valuation through expectation of higher dividends.

    How will this effect RMS
    Door 1
    2.3% return in a deflationary gold market.
    Door 2. 12% in a diversified miner or an industrial stock.

    RMS would need to
    increase its dividend 400% to meet market demands for better return on investment and compete with inflation.

    I am not suggesting RMS increase dividends. I am pointing out a market reality.


    Last edited by david25: 24/06/22
 
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