Friday Email: 13 March 2015
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 FTSE 100 had a poor week overall falling over 100 points in what was a pretty dull week in general as the reporting season wound down. We saw good increases from Centaur Media, SIG and Cineworld, but that was about it. As we alluded to last week, stocks at the top of the optimizer tend to be about to do something bad with their dividend or are undervalued and we saw that with two of them this week. The worst was Morrisons supermarkets who are promising a dividend of at least 5p next year which ends a proud recent record and takes us back to the level paid out in 2008. We have pencilled in 6p which is slightly higher than the 5.8p paid in 2008. Esure decreased their dividend slightly, which we though was a pretty good effort given that car insurance premiums are on the rise now and with their excellent managment. We added them to the trading portfolio on results day at 212p. The declared dividend is 11.7p, a 12% reduction on last year for a yield of over 5% for that dividend alone.
We also added Ferrexpo at 53p for an astonishing payout of 4.375p by way of a special dividend and 2.2p from its final dividend for a total yield of 12.4%, both benefitting from the rise in the dollar when translated into sterling. They actually did very well and make a lot of money, but they do have operations in the Ukraine which is naturally scaring investors, but for that yield and a P/E of 2, there is already a huge amount of risk built into the price.
Top of the optimizer, Raven Russia also increased its payout by 20% and runs a similar risk to Ferrexpo. The following from the chairmans statement shows that like Ferrexpo much risk is already priced in with a market cap of just £328 million; 'at today's date, we have $247million of free cash, the majority held in the Guernsey holding companies'
So, very much an examination of the top of the Optimizer this week, which goes to show that it is not for the faint hearted. There are plenty of companies with over a biliion market cap, decent cover over 2 and a yield over 5% where investors can feel much more secure.
The week ahead is much quieter and we are going to take the opportunity which we have not had this past few week, because it has been just too busy, to have a good look at the results and produce a piece of rersearch with a mini portfolio of 5 stocks that we think did very well.
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: 06 March 2015
The past week was a little disappointing in that we never really challenged the 7000 mark on the FTSE 100 as the jitters over the election are starting to creep in. That said lets have a look at the dividends for the past week and you have to say that income seekers must be lapping it up. We saw specials declared by Spirax-Sarco, Amlin, Hiscox (capital return), Direct line, ITV and Novae.
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