Friday Email: 30 August 2013
Every Friday morning our lead analyst Mark Riding sends out his weekly run-down and upcoming events in the investor calendar, like this one:
The short week was very very busy interms of interim declarations. The highlight for me was Admiral who produced another really good performance in the face of tough competition in the motor insurance market. They increased their dividend by 8.4% to give a yield over 11% on the 3 dividend optimiser. Last year the wife of the founder Henry Engelhardt purchased a large number of shares in the face of a drop in the share price following the results. She may use their massive dividend payout to do so again. They are yielding close to 4% on this dividend alone and a similar sized dividend in six months time is on the cards.
Elsewhere the recent trend of realtively small dividend increases continued. Noticable exceptions came from Restaurant Group which today increased by 17%. Also Bunzl (14%), Kentz, who are subject to a takeover bid from Balfour Beatty by 20%; Regus (10%), 888 holdings (20%) Unite (60%) and Serco by 17%.
The big shock for us came from WPP who increased their Interim dividend by 20% and promised an increase in the payout ratio from yesterdays 37% to 45% within 2 years. We are expecting 4% per year resulting in a payout ratio of 41% next year and 45% the following year. This will underpin strong dividend growth in each of the next two years.
Looking ahead, next week looks significantly quieter on the corporate front, if not necessarily, in the markets. Caution remains the watchword for now as the uncertainty over the Middle East persists. Also, the revised US GDP numbers will probably add fuel to the debate over the tapering off and eventual elimination of QE, which has spooked the markets a few times already. The more the makets get spooked by this and the more that they shrug it off will eventually lead to it losing its relevance.
The Friday email is delivered to over 20,000 subscriber’s every week, and remains a widely read run-down of recent events and what investors can expect in the week ahead written by our chief analyst Mark Riding.
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Read next: 23 August 2013
The UK stockmarket has an uneasy feel to it right now. It was a week when two dividend giants increased their dividends by small percentages to keep up incredible track records. BHP Billiton increased their 2013 annual divdend by 4% and Carillion by 2%. Both of these companies are out of favour with investors, which is a reflection of investor's view on their sectors. In contrast, a very in form sector saw Bovis Homes increase their 2013 interim dividend by 33%. Hikma pharmaceuticals also did well increasing their interim dividend by 16.7% and they also paid a special dividend at the interim stage. There were plenty of companies passing on the dividend this week including Premier Oil, New World Resources, Kazakhymys and Hochschild mining.
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