Friday Email: 01 August 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:
Another quite scary week for investors passes. It was very busy and there were some notable highlights. The question is....has the market built in too much over the past 6 years of rises?
The market is in a downward spiral and when really good economic news such as that which came out from the US on Wednesday is initially received very well and then goes into a 200 point reversal, you know that there are problems ahead for equity market valuations. This is fantastic for the income investor that can ignore the capital aspects and concentrate on the income; Yields are rising and also the market is hitting quality stocks very hard giving excellent buying opportunities.
ITV is one such stock that has to be considered on fundamentals with a little bit of bid speculation built in. They have committed to 20% dividend growth in each of the next three years as the sleeping giant recovers. Read our article for investors intelligence written on January 8th 2013 when the price was 90p. The story is getting better and our predictions are coming to fruition.
The week ahead is even busier with an even larger number of companies reporting than did so last week. It is a very unusual week in that the most announcements come on the Monday and the Tuesday as opposed to most weeks in the financial calendar when most of the announcements come on Wednesday and Thursday so expect a brisk and busy start to the first week of August; traditionally; a pretty bad month for the stock market. This is the time of the year to watch out for bargains. The market will mark down everything and these next few weeks will be a good time to build up or restructure your portfolio.
Bear in mind that the strong pound has been hammering the results of the big dollar earners and also reducing dividends dramatically for those that pay their dividend is dollars. Has the rise in the pound been justified? A reversal of the trend would be a very good opportunity to pick up dollar denominated dividend stocks and see the dividend erosion reversed. Another example of this was this morning with Smith and Nephew. We will produce a suggested dollar denominated portfolio next week for members.
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.
It’s included as part of the free DividendMax trial.
Read next: 25 July 2014
That was an interesting week as SSE went ex-dividend and Easyjet produced really solid numbers that with the guidance given by the company indicates an increase in pre-tax profit for this financial year of between 14% (£545m) and 19% (£570m). Given that the current financial year is almost over, we can look forward to the following financial year, which, if the analysts forecasts are correct, put them on a P/E of 10.4. With the strong cash generation and high dividend cover, we would expect these numbers to translate into more very good dividend increases both this year and next. There was a very small impact on the forecasts due to the situations in Egypt, Israel and Russia, but for me, its about how they are beating up the competition. So many of these airlines are in transition and yet Easyjet just carries on outperforming its peers, year in, year out. The market's reaction was to knock the share by over 5%, which looked a little harsh.
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