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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.

This email was originally sent on Friday 30 August 2013

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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