Satrix divi is supposed to be 30 companies, selected from the JSE Top 40 and Mid-Cap indices, that are expected to pay the best normal dividends over the forthcoming year. Here are the returns of 3 of the Satrix funds:
| Fund | 5 years | 3 years | 2 years | 1 year | 6 months |
| Satrix Divi | 87% | 21% | 6% | -7% | 0% |
| Satrix 40 | 120% | 38% | 37% | 13% | 11% |
| Satrix Rafi | 142% | 41% | 34% | 12% | 12% |
Why did Satrix Divi underperform? Just look at some of the shares in this portfolio:
Abil
Barclays Africa
JD Group
Kumba
Lewis
Foshini
Truworths
Spar
Woolworths
Nampak
They all pay, or used to pay great dividends but what happened to their share price?!!!!
The BIG elephant in the room is Abil. This share is down 56% from it's high some months ago and it used to pay a good dividend, not so now! It constitutes 6.24% of the portfolio, the BIGGEST holding!
So yes......., the interest rates are on their way up which will be bad for all retailers like Spar, Woolies, Foshini etc. Divi has an 23% exposure to this sector (BAD). Resources underperformed over the last 3 years and offer value, Divi only has a 7% exposure (BAD). Divi is supposed to give great dividends. The latest figures show that the Dividend yield on Satrix Divi is 3,57%, compared to Satrix 40 with 2.13% and Satrix Rafi with 2.32% (Rafi do not pay dividends out but roll it up in the fund).
A lot of the companies in Satrix Divi have fallen so much that they might outperform over the next 3 years but I lost my faith in index trackers because there is very little intelligence involved. I am switching to Rafi and some Resources companies. Retailers and Banks will be on my list of purchases later in the interest rate HIKING cycle.
p.s. Now if Abil was to suspend its dividend payouts, Satrix Rafi will be forced to sell out of Abil so IF there is a bounce in the Abil share price and a recovery takes place, Satrix Divi would have taken the 56% haircut and miss the recovery!
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3 comments:
It's recovered nicely since this post, just shows that sometimes we panic when things look bad, sometimes we just have to hang in there :)
Hello Michael
What you say is very true and I agree with the patience mentality. The problem that I have with Satrix DIVI on top of its bad performance (still only 7% for 12 months relative to 25% for top40) is that there is no intelligence that backs up the selection. That is the same with the top40 and al Satrix funds except the RAFI, and I see risk there as well. In these trackers everything is fine until they stop being fine. Over the longer term things can and should sort themselves out unless you get a bomb like Abil in the mix that might not recover. By the way, I think Abil will recover over time. My preference is to invest in something where you have a fundamental reason to do so and any tracker investment loses points on that score! DIVI has under performed for the last 2 years and I believe that it is not a panic switch out of DIVI. If you analyse the DIVI fund it is not the best investment on a risk reward basis and the yield does not compensate for the higher risk.
Hi Joe
I agree about the Satrix ETF's intelligence, and have slowly been moving more money into RAFI, I will however leave the money I have in DIVI and INDI.
INDI is really starting to worry me though, as it's done so well for so long, but I will hold on for many years to come and hope it pays off.
Cheers
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