Letters of the Week

Calculating yield, dividend streams, and the politics of superannuation.

I do not understand the logic underlying Adam Carr’s analysis of the Commonwealth Bank of Australia yield. If a share is worth $20 today, then that is the relevant figure for calculating yield, not the $10 I may have paid to purchase it some time ago. The opportunity cost of holding the share is $20 and if the dividend is $1 then it is yielding 5%, not 10%. Surely date of purchase and historical cost are quite irrelevant to the exercise (putting aside possible capital gains tax issues).

B Bartley

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