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Friday Email: 07 March 2014

Every Friday morning our lead analyst Mark Riding sends out his weekly run-down and upcoming events in the investor calendar, like this one:

Many thanks to all of you who wrote to point out that a dry squid would be a dead squid, but a damp squib is in fact a damp firework / mining device in old parlance. I could say that I put it in to see how many of you were awake, but alas that is not true. My only excuse is that i was writing very late in the evening. Good to see so many of you read the email and thanks for the education. Somebody even kindly sent me this:

http://www.telegraph.co.uk/news/uknews/4799157/Damp-Squid-The-top-10-misquoted-phrases-in-Britain.html

This past week or so has shown the importance of currency to income seekers. Very very few of the dollar denominated dividend payers have manged to show an annual gain in the dividend in sterling terms this year, witness Standard Chartered, who this week announced a 2% rise in the dividend in dollar terms which will translate to an almost 10% reduction if rates stay the same between now and the exchange rate setting date.

Our current stance on the market is only neutral right now. Earnings have not been great so far and dividends have been generally below our expectations.

I read the Investors Chronicle last week and was surprised to read the headline from Algy Hall ''Ditch dividends, go for growth".  Closer reading revealed that he meant ditch high yielding companies, which is not quite the same. We like companies that grow their dividends quickly or consistently and every now and then, as in the case of Admiral you get a very high yield and decent growth in the dividend as well. It was part of our model portfolio in January and we got our 10% rise in the dividend this week. It is up almost 15% on the year so far. At the end of March we will review and re-weight the model portfolio which has risen just shy of 8% whilst the FTSE 100 has risen from 6749 to 6788, just about 0.5% in the same timeframe. The star performers to date have been Anglo American (25.6%), Chemring (25%) and Man Group (21.8%).

The week ahead looks very quiet after the past two to three weeks but we will be watching one or two of the companies reporting very closely, especially Morrisons supermarkets who are trading pretty low at the moment and in view of their reduced capital expenditure program in the coming years will be releasing surplus capital to shareholders. The dividend policy remains progressive but the 10% increase guarantee has now gone and is replaced by the prudent measure of targeting 2 times dividend cover.

The week just past had some good highlights but overall, was in our view slightly disappointing as plenty of companies missed the forecast dividend increase, if only by small amounts. There were very few upside surprises but we were happy with MoneySupermarket, a model portfolio constituent which increased its full year dividend by 30%. Also, Schroders, Legal & General and Unite all produced increases of 20% or more.

Our next piece of research for paying subscribers is underway and we are aiming to publish either Wednesday or Thursday next week.

This email was originally sent on Friday 07 March 2014

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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