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.
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$1.89 |
Change
0.020(1.07%) |
Mkt cap ! $2.160B |
Open | High | Low | Value | Volume |
$1.84 | $1.89 | $1.82 | $6.030M | 3.229M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
5 | 88275 | $1.89 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$1.89 | 5659 | 1 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 2236 | 1.885 |
6 | 2290 | 1.880 |
2 | 2507 | 1.875 |
6 | 65362 | 1.870 |
2 | 14962 | 1.865 |
Price($) | Vol. | No. |
---|---|---|
1.890 | 5659 | 1 |
1.895 | 73288 | 6 |
1.900 | 55048 | 3 |
1.905 | 14962 | 2 |
1.910 | 4336 | 2 |
Last trade - 16.10pm 27/06/2024 (20 minute delay) ? |
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