A look at the top of the DividendMax optimizer reveals a number of companies not yet covered by dividend of the week.
This week it comes from the financial services industry. It would be very easy to pick out MAN Group with the promise of a decent final dividend, but we are going to go for a company that has slipped under the radar somewhat. It has a superb track record of increasing dividends and has increased the dividend by 80% from 2007 – 2012.
It has increased its dividend every year since 2001 and is forecast to continue this trend with further increases pencilled in by analysts for 2013 and 2014.
The dividend has increased by 550% during this timeframe from 4p in 2001 to 22p in 2012. The dividend is forecast to increase by around 10% this year.
Dividend cover is respectable at 1.6. The balance sheet is strong, with relatively low borrowing and plenty of cash on the balance sheet. Free cash flow is strong.
The company will deliver £50 million of P&L cost savings in the coming year.
Commenting on ICAP’s recent interim results Michael Spencer said:
“This has been one of the toughest periods in my 36 year career in the wholesale financial markets.
Trading volumes this year have fallen significantly across nearly all asset classes and geographies whether equities, futures, FX, commodities, fixed income and also OTC.
This has been caused by a combination of factors: global economic weakness, the continuing Eurozone crisis, bank recapitalisation and deleveraging, uncertainty over regulatory reform, quantitative easing and near zero rates, to name the main ones.
I do not believe this negative environment will continue indefinitely but equally I do not expect it to improve imminently.
It has been a time to weather a hard storm and prepare thoroughly for financial regulatory reform.
Whilst this does not make happy reading, it is in the past and if the current optimism in the stock market is to be believed, this could well mark a bottom in ICAP’s business cycle.
The share price is currently a fair way from last years high of 431.5p and currently stands at 320p, some 25% off the peak. the shares were more than double the current level at over 700p 5 years ago.
There is little doubt that ICAP will be a major play on financial market recovery and whilst investors have been targeting recovery in the likes of Lloyds, Barclays and RBS, I would prefer to back a company that weathered the storm without the help of either the taxpayer or Middle Eastern investors.
