A couple of months ago the financial press was full of the gloom associated with the huge loss suffered by the Commonwealth Bank after it had written down the value of its investment in Colonial Mutual Life. This included its subsidiary Colonial First State Funds Management.

The simple fact is that if you are holding Commonwealth Bank Shares so that you can share in the profits they make through receiving dividends then it is now and always will be absolutely immaterial whether their shares are quoted on the stock market at $5 or $25. The value to you of these shares is the continuing (and growing) income stream from dividends.

When I first studied accountancy such items as asset revaluation (which is all that has happened here) were regarded and classified as “abnormals”. It is a fact that writing off half a billion dollars has absolutely no effect whatsoever on any shareholder of the Commonwealth Bank who wants to be receiving dividend income.

It is a pity that our financial press regards “Bank loses Half a Billion Dollars” as more likely to sell papers than “Commonwealth Increases Operating Profit by 7%”. Both statements are equally correct. The “noise” created by the press is very powerful but if you are a long term investor, whether in managed funds or direct shares, you need only concentrate on the annual income you receive.

Those fortunate Australians who bought into Telstra when it was first sold (too cheaply in my opinion) to Australian investors may be lamenting the current price. I suggest that they look at their dividend slips to remind themselves that each and every year Telstra has paid an ever increasing dividend. Go and buy some more. If they were cheap when they were first released then they certainly are cheap now.