-=> Lindsay McKeon wrote to Graham Comitti <=- 
-=> On 11-18-94 about Dividend Re-investment p <=-

LM> GC> Like Bob Muirhead, I'm generally against DRP's, for 
LM> GC> the reasons he has 
LM> GC> given, as well as the odd lot problem when trading 
LM> GC> as against long term 
LM> GC> buy and hold investing.

LM>The odd lot problem is a major bummer, but I'm undecided about
LM>some of the other points. The reduction of debt is not to be
LM>sneezed at, especially with some of the companies involved.

I agree and think that the debt reduction angle is probably one of the 
major better points of DRP's

LM>Fosters, I believe, had a >100% debt to equity ratio. They've
LM>since reduced their debt to manageable levels (and suspended
LM>the DRP as a result). Those sort of debt levels cut into 
LM>everybody's dividend levels. Some have argued that DRPs keep
LM>dividend levels up, as the company knows they'll get much of the
LM>cash back and can thus be more generous initially.

True

LM>As to dilution of shareholdings, what about all those companies
LM>which make share placements to large institutions and other 
LM>companies - The small shareholder never gets a look in.

Again I agree, in reality the market is all about the big investors, and 
these placements are all about profits for the big ones.  Like most of 
the shares "given" to directors.

LM> 
LM>Some companies, such as CSR, give shareholders the facility to
LM>round up to a marketable parcel either at every distribution or
LM>when you sell the bulk of your holdings. I think the ASX or the
LM>ASC should make a roundup/rounddown facility a compulsory
LM>part of every company DRP scheme.

This roundup/down facility can be one of the best ways for a buy and 
hold investor to increase return.

LM> 
LM>The fact that DRP can result in you buying at a time when you should
LM>be standing aside or selling is also valid, but partially depends
LM>on the style of investor. Some people are happy to buy and put
LM>their shares in the drawer for the next 10 years.

For the buy and hold investor in the likes of BHP, NAB etc, the DRP's 
along with roundups can be very rewarding.

 It may not be
LM>the optimum strategy but it suits them. Come to think of it, I
LM>wouldn't have minded having a 10 year DRP in place with BHP or
LM>NCP ;-).


You would have done very nicely, although you may have been sweating a 
bit with NCP from '87 to '91.  A parcel of NAB would have also been 
handy to have over the same period.

As I've previously stated, I'm generally against DRP's and the like, but 
that doesn't mean I don't make use of them, along with discount cards 
etc. Make best use of whats offering and what gives the best return, is 
my motto, the ideal may be by splitting your portfolio into trading and 
investing, anyway that's what I'm trying to do, but it does pose some 
problems.

BTW I think the CML shareholder discount card can give the best return 
to the small investors than any of the other schemes.  Anyone/family 
that spends around $100 wk or more in coles/target etc stores would be 
hard pressed to find a better investment. 

Here's to good trading & investing. 



Regards, Graham from Sunbury

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