Friday Email: 03 October 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:
It has been a torrid time for the market ever since the Scottish referendum when we were contemplating yet another assault on the 6850 level on the FTSE 100. Fear has indeed taken over and as Buffett said 'be fearful when others are greedy and greedy when others are fearful'. We all know that he is correct. His track record proves that. Here at DividendMax, we just look at it and think, 'yields are rising'. Interest rates are still low and will not go up for a long time yet, no matter what people speculate about. Equities are the number one asset class for income. We said at the start of the year that this was going to be at tough year and so it has proved to be. The market is well down on the year and therefore the only return that investors have had is from trading and from dividends, both of which we strongly advocate. Ironically, apart from a few sectors, such as the supermarkets, we have seen tremendous growth in earnings and dividends, so the market has substantially de-rated this year.
This morning brought the pre-close trading update from the mighty Easyjet, where another 20% plus dividend increase is on the cards and more double digit increases are highly sustainable given the very decent level of cover. It carried more customers, generated more revenue per seat and produced a pre-tax profit forecast range with the lower end being above the average analysts forecasts. Additionally, their fuel bill for next year is forecast to be £50 million less than last year offset by adverse currency movements of £20 million, so on fuel alone we already have a big uplift next year. There is increased capacity coming onstream and the management are top notch. They are probably trading on around 10 times next years earnings. Not good enough in our view given their recent track record. We are now looking for a 35% dividend increase with the full year numbers in November and we would not rule out a special.
The past week was quiet, but to put the current panic into perspective, we had three companies that we cover declare dividends. Wolseley increased by 25%, James Halstead by 16.7% and Ted Baker by 18.9%. The week ahead is probably the quietest week of the year, which gives you some idea as to why traders and hedge funds can afford to be so negative and short the market. The only company that we cover that is reporting is N. Brown group. Is the world really falling apart. No. Listen to Warren!
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