Sainsbury's 3rd Quarter Trading Statement

[Wizard]

I think looking at it in real terms is not helpful, I want to know what is happening after inflation as that same inflation will impact how much income I need.

Wizard - is that what you really mean? Normally, we refer to looking at something in "real terms" meaning "after inflation", so surely that is helpful? - in fact it's what one needs.

You're right Arborbridge, I managed to get it a bit around my neck, apologies. All I am trying to say is that income growth is not needed for its own sake, but only to ensure that income continues to cover costs in a world where costs tend to rise. If there was no increase in costs a flat income would also be fine.

it is a perfectly good investment for income purposes if my costs also remain flat in real terms?

I'd say that's a really big IF My costs are surely rising faster than Sainsburys dividend and probably faster than the "official" CPI.

I do not understand why it is automatically the case that your costs rise faster than Sainsbury's dividend. Are you meaning given Sainsbury's historical dividend growth?

Yes, of course CPI or any official measure is a crude proxy for any individual's cost increases year-on-year. But why do you think your increases will always be higher? The BBC used to have a tool on their website that allowed you to unpick CPI and calculate your own personal inflation rate, mine always came in below CPI at that time. Of course it may be above CPI at others. Whether it is higher or lower just comes down to what your costs are made up of compared to the CPI bundle.

Terry.

[Arborbridge]

Wizard Terry,

We're mostly in agreement. As regards SBRY dividend progressing less than my expenses, I was looking at the historic picture. In the future, I grant you, it could be better, but the record so far is not encouraging. For the last three calendar years my dividends from SBRY have decreased, and the TR is still in negative territory - though better than the worst point in Jan 2015. Now. it's either a good buy or a further deterioration: I'll find out when it's too late to benefit from the knowledge. But that's the nature of investment, and why HYP is suitable for me.

If no cost increases were a given, then I'd have to agree - we wouldn't need dividend increases. That condition is never going to happen though the opposite might be interesting. That is, would dividends be able to keep up when and if costs starts rising quickly again?

As regards the BBC personal inflation calculator; I tried it once several years ago and my RPI came out at about 3% - that was higher than CPI at the time. Unless one keeps good records, it is very hard to make a reliable estimate of personal RPI. When allocating my pension salary for the coming period (I usual only review once a year) I set the increase at RPI plus a "bit", where a "bit" is a finger in the air decision!

Arb.

[77ss]

If the trend continues into the future and Sainsbury stays the same, then it will be a poor investment. If I choose not make this assumption, as it is almost impossible to predict, then there is more chance of a recovery. My instinct is to ignore what I see as a trend in this case .

Surely, 'impossible to predict' applies whichever assumption you choose to make.

Don't apply it only one way.

[Arborbridge]

If the trend continues into the future and Sainsbury stays the same, then it will be a poor investment. If I choose not make this assumption, as it is almost impossible to predict, then there is more chance of a recovery. My instinct is to ignore what I see as a trend in this case .

Surely, 'impossible to predict' applies whichever assumption you choose to make.

Don't apply it only one way.

And so, we are neatly back to SI

[Wizard]

Wizard Terry,

We're mostly in agreement. As regards SBRY dividend progressing less than my expenses, I was looking at the historic picture. In the future, I grant you, it could be better, but the record so far is not encouraging. For the last three calendar years my dividends from SBRY have decreased, and the TR is still in negative territory - though better than the worst point in Jan 2015. Now. it's either a good buy or a further deterioration: I'll find out when it's too late to benefit from the knowledge. But that's the nature of investment, and why HYP is suitable for me.

Completely agree Arb the historic picture from Sainsbury's and recent cuts mean I would not consider them for an HYP at this point.

WizardIf no cost increases were a given, then I'd have to agree - we wouldn't need dividend increases. That condition is never going to happen though the opposite might be interesting. That is, would dividends be able to keep up when and if costs starts rising quickly again?

As regards the BBC personal inflation calculator; I tried it once several years ago and my RPI came out at about 3% - that was higher than CPI at the time. Unless one keeps good records, it is very hard to make a reliable estimate of personal RPI. When allocating my pension salary for the coming period (I usual only review once a year) I set the increase at RPI plus a "bit", where a "bit" is a finger in the air decision!

Arb.

Yes, again agreed, a world of stale prices over an extended period is merely a hypothetical thought experiment. In my personal modelling I have broken my costs into a few buckets, one of these is 'general' living expenses for my wife and myself, another is the 'general costs' and then there are others for specific costs such as school fees the increases for which seem to well above general inflation.

I use a long term average for inflation regardless of the current rate as the basis for modelling, I have a note in my file that was 3.5% between 1949 and 2014, but didn't note the source. But I have found a BoE inflation calculator that shows a very different rate of 5.4% between those years. The rate between 1986 and 2015 is shown as having been 3.4%. Maybe this means the 3.5% I use as my base assumption is too low.

Terry.

[Arborbridge]

Terry,

Fortunately, whichever number I've used, I observe that:

1) I'm living reasonably comfortably
2) My bank balance is always acceptable and not lower than last year and I'm debt free.
3) My investment income and state pension are comfortably larger than outgoings
4) and I'm managing some re-investment.

So what ever the rate, so far I've got away with it! My wife says "why are you investing this money?" "When are we going to spend it?" Pretty valid questions; what's the point of potentially feathering the nest of some care home provider?

If only I could glance at my life-time's script, I could come up with the answers

[pendas]

I'm thinking now may be a good time to sell.

I first purchased in May 2009 and my average price is £3.29. With dividends, I'm breaking even at the moment. It's held in a unsheltered account and I will be selling shares from this account to fill ISAs in April. Normally I choose those shares with the highest gains to sell and repurchase the same, but this account is getting depleted of shares with gains.