A dividend hounds approach to value investing.

[Hectorplains]

Thanks Basil,  I bought HLG at an average price of $5.78 I now find it difficult to buy more shares in the company @ $9, in a similar position with CEN and TRA

From a behavioral psychology standpoint, it's easier to average down than up (buying more of a stock as its price increases.) Averaging up feels counterintuitive but it is actually a much more rational strategy.  Our psychological hurdles make it feel unnatural. It's because it flies in the face of the desire to get something for as little as possible. As consumers we've become super conditioned to seeking discounts and sales. Buying more of something for a higher price feels contradictory to this ingrained behavior.  To average up, you have to acknowledge that the stock was even better than you thought it would be, or that you could have bought more sooner. It requires celebrating success, not trying to fix a past 'mistake'. Well that's my unqualified cod -psychological take on it on this lovely spring morning!

[Basil]

What are the thoughts on shares such as BRM which have a decent & predictable PIE return. Apart from a big spike & drop they have been relatively consistent in SP (no growth to speak of)?
I understand the gains of a growth AND div stock, but I am currently after income primarily.

I have been a BRM shareholder and am presently only a warrant holder.  They had built a track of matching the benchmark sector after fees up until 2024, i.e. you get benchmark returns and the cost of running the fund is covered by their outperformance but performance in 2025 has been extremely disappointing.  I will be hounding Robbie Urquart the investment manager at this years annual meeting for an explanation and asking him why he persists with some of his losing picks and pays exorbitant PE ratio's for some of his picks with modest growth. 

Before 2025 I would have said, great returns and they match the index so the 8% tax free PIE distributions are an ideal way to boost income.  As you've quite rightly noted, there has been little growth, (10 years ago the share price was 66 cents) so its all about the income.  While 8% tax free is fabulous, keep in mind it hasn't grown so income in real terms from capital invested has diminished significantly, as has the value of your original investment.

How big a factor this is will vary from one investor to another.  Inflation has really surprised since Covid and I did an exercise recently for a client and he was shocked that the cumulative effect of inflation since covid hit was 23%.  Even if inflation can be contained to say 2.5% in the years ahead, someone entering retirement now at 65 and investing say $100K into BRM and getting $8K income, the compound effect of 10 years of inflation will see the costs of goods go up 28%, rates and insurance are sure to increase much faster than that, so that $8,000 isn't going to go as far in the future.

There's a fair bit of evidence that retirees spend less in their latter years, one retirement commentator I have observed calls the 65-75 year range as the go-go years where retirees travel and spend a lot, and the 75-85 range the go slow years, wherein they spend a lot less so the likely reduction in spending power over time from an investment in Barramundi may not be as concerning for many.

Finally, its well worth noting that many other PIE funds allow regular withdrawals which you can set up when you invest.  I suggest say half a percent per month, (6% per annum) and if the fund is performing at say 10% per annum average that allows some of the income to be reinvested for growth to cover inflation.

Maybe use the same diversification principle I've noted above and have no more than 14% in any one fund.

I think Otago K has made the point well and Temu probably serves a different sector of the market.
Its very important with income investing to not just focus on the current return but to think about how its going to grow over time.

Maybe a worked example best illustrates this.  When I first bought into HLG at $2.70 in August 2016, ironically enough I only ever invested for income.  They had built a very, very long and stable track record of paying excellent dividend returns and as you can see from the 2016 annual report here file:///C:/Users/user/Downloads/3367_HG_Annual_Report_2016_FINAL_WEB.pdf , see page 3 were paying 30 cps in dividends, fully imputed, worth 30 / 0.72 = 41.7 cps gross.  41.7 / 270 = 15.4% gross return.
I'd be happy as a pig in mud collecting those dividends forever and a day, and I figured with their very long history I could rely on them.  Little did I realise that James Glasson was about to start driving growth with Glassons Au and sales there have grown from $41.2m in 2016 to $251.5m in FY25, that's a 9 year CAGR of 22.3% !  That's transformed the company from a no growth mainly N.Z. operation to a strongly growing Australasian company which now has more than 53% of its sales with Glasson's Au.

The share price has more than tripled and dividends have grown nicely.  To be honest, I faced a barrage of criticism on the other forum about this strategy.  All sorts of people told me that Zara for one and many others were suggested, in fact a whole host of other overseas retailers would destroy Glassons market share.  Its never happened and their market share in Australia continues to grow very strongly.

At the core of my belief is that the target market, women in the 13-30 year's demographic want to inspect the clothes for themselves, feel the fabric and check the fit and most importantly of all, try the garments on so they can be sure they look their best.  For many, the ethical ESG approach Glassons take is also important.  Aside from that is the joy of going out shopping and shopping in a friendly, modern welcoming environment.  The times I have gone into Glassons stores to buy gift vouchers for my kids and now grandkids, I have been very impressed with the stores and how friendly and welcoming the store manager has made me feel.  The modern stores that are well lit, well laid out, welcoming staff and mid price point are some of their key attributes.  Keep in mind Hallensteins can trace its roots back 149 years https://shareinvestornz.blogspot.com/2010/06/history-of-hallenstein-glasson-holdings.html#:~:text=His%20first%20store%20opened%20in%20the%20Octagon%20in,and%20in%20Wellington%20and%20Oamaru%20the%20year%20after. and Glassons started in 1918, 107 years ago.  Imagine all the challenges both brands have withstood over the years.

[Basil]

From a behavioral psychology standpoint, it's easier to average down than up (buying more of a stock as its price increases.) Averaging up feels counterintuitive but it is actually a much more rational strategy.  Our psychological hurdles make it feel unnatural. It's because it flies in the face of the desire to get something for as little as possible. As consumers we've become super conditioned to seeking discounts and sales. Buying more of something for a higher price feels contradictory to this ingrained behavior.  To average up, you have to acknowledge that the stock was even better than you thought it would be, or that you could have bought more sooner. It requires celebrating success, not trying to fix a past 'mistake'. Well that's my unqualified cod -psychological take on it on this lovely spring morning!

Brilliant, its so nice to see you back making contributions...that's one of your very best.  I bought more HLG at $8.95, not really celebrating my success, maybe I should be ?, but simply because the metrics are  compelling, (I think its Australasia's cheapest growth story) and I think they have only just hit critical mass with Glassons Au and have a massive runway for growth there over the next ~ 20 years.  Additionally you get paid really well with dividends while it grows strongly and that makes it a perfect dividend hounds stock just like Turners. 

[Hectorplains]

Brilliant, its so nice to see you back making contributions...that's one of your very best.  I bought more HLG at $8.95, not really celebrating my success, maybe I should be ?, but simply because the metrics are  compelling, (I think its Australasia's cheapest growth story) and I think they have only just hit critical mass with Glassons Au and have a massive runway for growth there over the next ~ 20 years.  Additionally you get paid really well with dividends while it grows strongly and that makes it a perfect dividend hounds stock just like Turners. 

Hika, thanks for the kind words! My best capital destruction has been  through averaging down.   I took awhile to me to twig (my wife will tell you that is my strongest character trait) but the odds on this strategy are poor. Hey, it might work for smarter folk than me but I'd take a really compelling case for me to engage in the practice. 

[Otago K]

From a behavioral psychology standpoint, it's easier to average down than up (buying more of a stock as its price increases.) Averaging up feels counterintuitive but it is actually a much more rational strategy.  Our psychological hurdles make it feel unnatural. It's because it flies in the face of the desire to get something for as little as possible. As consumers we've become super conditioned to seeking discounts and sales. Buying more of something for a higher price feels contradictory to this ingrained behavior.  To average up, you have to acknowledge that the stock was even better than you thought it would be, or that you could have bought more sooner. It requires celebrating success, not trying to fix a past 'mistake'. Well that's my unqualified cod -psychological take on it on this lovely spring morning!

Apologies if this sounds to diminish the validity of your averaging up logic expressed but I do have a hesitancy to blindly adopt a traditional dollar cost averaging approach to investing into a particular stock, if I see it has value at the time I will continue, but cease if I think it is a bit overvalued by Mr Market. Just had your subsequent post hit the thread, it really is I take it you say a question of de-personalising the decision to BUY more or not I find: a consequence of a human ego.
FSF for me was an over-weighted option to buy in the past years now long past, but looking forwards I would struggle to be a buyer at present, not to say that Mr Market will not likely reward new investors, but I need not consider further FSF investment. discl a current seller despite holdings being free carried, partly due to for me the current portfolio value % of my holding is rather high, and also I think the chances of a lower dividend in the next trading season is heightened.

[Cod]

Hi,

What are the thoughts on shares such as BRM which have a decent & predictable PIE return. Apart from a big spike & drop they have been relatively consistent in SP (no growth to speak of)?
I understand the gains of a growth AND div stock, but I am currently after income primarily.

I have concerns over the likes of Temu / whatever the other one is called eating in to the future HLG market as more people get comfortable with online, and the much lower prices make it more worthwhile. Doesn't look like that is happening currently though?

Once BRM and the other fisher funds were no longer default kiwisaver products, I realised it was that fact that was "propping" them up. Now i may be wrong, I usually am, but it seems to me historically that ever since that announcement BRM and others have performed poorly.

[Hectorplains]

Apologies if this sounds to diminish the validity of your averaging up logic expressed but I do have a hesitancy to blindly adopt a traditional dollar cost averaging approach to investing into a particular stock, if I see it as value at the time I will continue, but cease if I think it is a bit overvalued by Mr Market. Just had your subsequent post hit the thread, it really is I take it you say a need of de-personalising the decision to BUY more or not I find: a consequence of a human ego.
FSF for me was an over-weighted option to buy in the past years now long past, but looking forwards I would struggle to be a buyer at present, not to say that Mr Market will not likely reward new investors, but I need not consider further FSF investment. discl a current seller despite holdings being free carried, partly due to for me the current portfolio value % of my holding is rather high, and also I think the chances of a lower dividend in the next trading season is heightened.

Absolutely, I'm not advocating for blindly averaging up

On FSF, I agree also with your point about portfolio weighting and dividend risk as good reasons to trim.  As was Basil's early point about FSF being a cyclical stock and around the top of the cycle.

[HAWKDOG]

Once BRM and the other fisher funds were no longer default kiwisaver products, I realised it was that fact that was "propping" them up. Now i may be wrong, I usually am, but it seems to me historically that ever since that announcement BRM and others have performed poorly.

Performance is dependent on your goal.  If  you are only after dividends - 8.39% is pretty hard to beat with basically no tax deducted. And its quarterly.  And the DRIP price is a fair bit lower than the price on the day.
What BRM is not is a dividend growth stock like say TRA -  I am not buying BRM for share price appreciation - i'm buying with profits I make from growth stocks.

[SmallSteps]

Performance is dependent on your goal.  If  you are only after dividends - 8.39% is pretty hard to beat with basically no tax deducted. And its quarterly.  And the DRIP price is a fair bit lower than the price on the day.
What BRM is not is a dividend growth stock like say TRA -  I am not buying BRM for share price appreciation - i'm buying with profits I make from growth stocks.

Thanks everyone for the info (esp. Basil for the clear reasonings), I've learnt a lot quite quickly! I compared BRM with a bank term deposit, so in my over simplistic way 8%+ on a relatively safe investment was much better than a bank deposit, and assuming the share price doesn't go down, inflationary impact is the same between the two (with added benefit of Warrants). I'm kind of similar to you, but back to front as in I don't have much in the way of growth shares, so was looking at investing a chunk of the divs from BRM into growth shares from this point on.
I have been on this site and the other for a while, so was interested to get current opinions on BRM and the other stocks. Definitely looking into HLG / TRA / maybe Tower. It's not a vast sum, but will add up over time. I'm not a trader, just buy and hold unless something compels me to sell (e.g. WHS).

[LaserEyeKiwi]

Ok so one thing about BRM I have some trouble getting my head around - you are essentially paying a huge management fee for stocks that are all publicly listed?

For instance in the last 2 financial years the dividends BRM received from the companies it invested in, were basically fully consumed by the management fees and associated costs of running BRM.

For example:

2025:
Dividends received from its investment portfolio: $4.266m
BRM operating expenses: $3,990m

2024:
Dividends received from its investment portfolio: $3.839m
BRM operating expenses: $4.104m



The dividends being paid to BRM are coming from selling down investments and/or warrants being issued.

One would instead have dramatically better performance if they instead just purchased the same investments they list in their investment holdings.

[LaserEyeKiwi]

In the latest BRM annual report they have a chart showing total return from October 2006. Starts at $1, and today the total return including dividends is worth $3.

By comparison the S&P500 total return (including dividends) over that same period is $7.56.

[Basil]

https://barramundi.co.nz/documents/nav/mktupdte-brm-brm-december-2024-quarterly-newsletter-436320.pdf
This unpacks a bit more about what I was talking about earlier.  2025 has been a shocker for BRM but if we have a look at the ten years before that, we see in the five years to 31 December 2024 their gross return was 13.6%, NAV to NAV return 11.1% and the benchmark was 9.0% so they outperformed the benchmark after fees and tax.

https://barramundi.co.nz/documents/nav/mktupdte-brm-barramundi--december-2019-quarter-newsletter-315574.pdf
In the five years before that to 31 December 2019 their gross return was 14.4%, adjusted NAV to NAV return after fees was 11.0% and the benchmark was 11.5% so they came very close to matching the index after fees and tax.

Overall, over the 10 years to 31 December 2024 they outperformed the benchmark index after fees and tax.

2025 has been such a shocker the question presents, do you throw the baby out with the bathwater or hope that after a short period of underperformance, they might outperform ?  The jury is out and they need to outperform between now and August 2026 to make me inclined to exercise my considerable holding in BRM warrants.

I for one don't think comparing Australian performance with the S&P adds anything to this thread.  People will make their own decisions about asset allocation and many will already have exposure to US markets which are trading at record ever metrics, especially the tech sector.

Owning the underlying shares yourself for many is an option, for others, they are happy with a simple approach with the 8% per annum PIE distributions and regular warrant issues.  Horses for courses, whatever you're more comfortable with.  I tend to only buy BRM when they're at a reasonable discount to NAV, such as 6% or more and I think that, together with my experience in valuing the warrants and taking advantage of mispriced opportunities there as they occur from time to time, keeps me interested in the company but as mentioned before, I consider FY26 to be a "show me your investment methodology works" year or I will have to consider alternative Australian strategies going forward. 

[moose]

One question that I am unsure about is if they are a true "buy and hold" company (in which case the fees look high) or if they also short-term trade a bit in some of their holdings (e.g. F&P)? I'm sure that someone is smart enough to work it out given the nta,SP and declared dividends?
(oops - this was in realtion to KFL not BRM - but the same question applies to BRM e.g. with their Xero holding)?

[HAWKDOG]

Ok so one thing about BRM I have some trouble getting my head around - you are essentially paying a huge management fee for stocks that are all publicly listed?

For instance in the last 2 financial years the dividends BRM received from the companies it invested in, were basically fully consumed by the management fees and associated costs of running BRM.

For example:

2025:
Dividends received from its investment portfolio: $4.266m
BRM operating expenses: $3,990m

2024:
Dividends received from its investment portfolio: $3.839m
BRM operating expenses: $4.104m



The dividends being paid to BRM are coming from selling down investments and/or warrants being issued.

One would instead have dramatically better performance if they instead just purchased the same investments they list in their investment holdings.

All good points.
Its possible you could make better performance purchasing all the same investments - one would have to go thru the exercise of determining the trading costs of buying them, what the dividend withholding tax level is and the cost of reinvesting those dividends (sharesies is pretty cheap if you pay the montly $15 fee).  Good exercise for someone smarter than me.

Also I would have to spend time monitoring all those stocks.
I would much rather spend that time looking for potential multibagger spec stocks where returns are >100%

I have a couple S&P 500 ETFs in the mix but really trying to get my divi yield up. The FIF rules definitely hinder this process.

[KW]

1.  "Dollar cost averaging" is an old theory that was developed for mutual fund investors - the forerunner to today's passive index funds, super funds, and ETFs.  Its about regularly putting your savings into the market (aka managed fund) and taking advantage of the power of compounding over long periods of time.  It is NOT about buying more of an individual stock as the price falls, or rises.  Do not confuse the rules for passive investing, with those for active investing.  

2.  As you all should know by now, DO NOT BUY SHARES IN A DOWNTREND.  This one act is responsible for the vast majority of portfolio destruction.  When it comes to an individual share, you cannot dig your way out of the hole like an index fund can, if its in a downtrend there is usually a fundamental reason as to why.  It won't just "come right" like an index does (because an index simply replaces all the loser stocks with winner stocks every 3, 6 or 12 months).  An index will never go bankrupt, while a company often does.

3.  The trend is your friend until the end.  This means stick in the stock until the trend changes.  Then sell it, and buy something else that is in an uptrend.  Do not give all your profits back to the market once the stock starts a downtrend.  Do not sell based on some random "valuation" metric that you have in your head - the market is irrational and great stocks will always go up way past any fundamental "value" that is placed on it.  This is because prices are determined by future expectations, not past performance.  How do you value the next 5 years of revenues and profits?  You usually cant, and the human tendency towards optimism means the share price will keep going up until the company reaches the point where those expectations start to become more certain (at which point the share price will then collapse back to earth due to market disappointment).

4.  Buy more of a stock that is going up at a rate that is outperforming the general market.  This is how you get rich.  Owning shares of the market's very best stocks.  Likewise, exit quickly the stocks that start losing you money.  Dont sit on losses waiting "to be right".  You may be wrong, or you may be too early which is the same as being wrong.   This is also known as "water your flowers, and pull your weeds".