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Friday Email: 29 May 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 Stock market has had a volatile week so far with a big fall on Tuesday after the bank holiday of over 100 points on the FTSE 100 index. This was all recovered on the following day and the market is trading slightly down on the week, but still above the 7000 level.

It has been a quiet week with the highest dividend increase coming from Paypoint with a 9.1% increase. Tate & Lyle managed 1.7% and Brewin Dolphin 2.7%. The main event from a dividend perspective was the first full year dividend from Infinis Energy who released their results on Thursday and shot straight to the top of the Optimizer after declaring a final dividend of 12.2p against a share price of 179p (now 183p as I write on Thursday afternoon). A yield of 6.6% from a single dividend is rare, so I thought it would be good to have a look at the results to see if it was sustainable and if there was any possibility of the dividend growing. I have to say that it is a tricky one, but on balance the yield probably outweighs the negatives. The company has delivered on its IPO commitments to date, but falling oil has reduced wholesale gas and electricity prices thus impacting Infinis adversely. They also have their major shareholder looking to sell down a stake which represents 70% of the company. Against this, the UK has legal commitments to reduce our carbon footprint, which would suggest more renewable energy has to come on stream, so a favourable political backdrop will help the company.

They have racked up a fair amount of Debt, but did manage to reduce it in the past financial year and they do have good visibility of cash generation in the coming year. However long term low oil prices will hurt them and it seems to me that this is the single most important factor in the investment decision. The dividend yield is very high and the dividend should be maintained this year, but to see dividend growth, a sustained recovery in wholesale oil and gas prices is needed. This requires a strong oil price and that is difficult to predict with the big fall on Wall Steet on Tuesday driven by a plunging oil price.

The week ahead is busier than last week with old favourite OPG Power Ventures reporting its final results on Tuesday and we are expecting the declaration of a maiden dividend. Other companies that we cover reporting next week include Synergy Health, whose takeover came into doubt on Wednesday; Johnson Matthey, VP Group, Halfords and Kcom.

Recent additions to DividendMax at the request of members are ENTU and IBEX (which look very interesting)

 

 

 

This email was originally sent on Friday 29 May 2015

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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