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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Last
$2.03 |
Change
0.040(2.01%) |
Mkt cap ! $2.308B |
Open | High | Low | Value | Volume |
$2.03 | $2.04 | $2.01 | $458.2K | 226.2K |
Buyers (Bids)
No. | Vol. | Price($) |
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15 | 26520 | $2.03 |
Sellers (Offers)
Price($) | Vol. | No. |
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$2.04 | 70787 | 25 |
View Market Depth
No. | Vol. | Price($) |
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19 | 37667 | 2.020 |
18 | 68579 | 2.010 |
16 | 98297 | 2.000 |
9 | 21695 | 1.995 |
12 | 104751 | 1.990 |
Price($) | Vol. | No. |
---|---|---|
2.030 | 21873 | 10 |
2.040 | 71922 | 25 |
2.050 | 106666 | 19 |
2.060 | 29010 | 8 |
2.070 | 265336 | 9 |
Last trade - 11.17am 27/05/2024 (20 minute delay) ? |
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Last
$2.05 |
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Change
0.040 ( 2.64 %) |
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Open | High | Low | Volume | ||
$2.04 | $2.06 | $2.02 | 274647 | ||
Last updated 11.34am 27/05/2024 ? |
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