Friday Email: 05 February 2016
Every Friday morning our lead analyst Mark Riding sends out his weekly run-down and upcoming events in the investor calendar, like this one:
That was a strange and volatile week in which dollar weakness demonstrated the effect that it can have for resources stocks on Thursday with Anglo American rising 19.95%, Glencore, 15.97%, Antofagasta, 15.97%, BHP Billiton, 10.79% and Rio Tinto 10.27% in a single days trading. The main stock indices are trading at around about where they were this time last week.
In company news Royal Dutch Shell (RDS) and GlaxoSmithkline cofirmed their dividend intentions over the next one and two financial years respectively. RDS have produced what they would hope to be numbers that indicate a bottom or near bottom for their industry as all of the cutbacks globally slowly kick in over the next year or so. With an historic yield of 8%, investors are partially hedged from continued dollar strength or weakness provided they can pay the dividend which their diversified business suggests that they can. If the dollar strengthens, the value of the dividend to sterling investors rises. If the dollar weakens, well, we saw what happened yesterday; capital appreciation as RDS rose 6.1% amidst the falling dollar. The past week was another week of steady dividend increases or dividends being held at last years level. Still no evidence of pressure on dividends with no reductions or cuts this week. The first big test will come next week when Rio Tinto announces its final results on Thursday.
Last week provided us with a look at what has happened to some dollar denominated dividends over the past year as we convert them into sterling.
Astra Zeneca's dividend was held but showed a rise in sterling terms of 9.6%
Royal Dutch Shell's dividend was held but showed a rise in sterling terms of 5.6%
BP's dividend was held but showed a rise in sterling terms of 8.4%
Smith & Nephew's dividend was increased by 4% in dollar terms and showed a rise in sterling terms of 8.8%
It is interesting to note the effect of timing as Astra pay a big final dividend that came at a good time for sterling investors.
In spite of these dividend rises most investors will be hoping for more dollar weakness if yesterdays share price rises are anything to go by as they seek to recover from the trauma of big capital losses in the past few years, particularly in the resource sectors.
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: 29 January 2016
The market is currently volatile, although overall, it has been an up week for the first time this year with the FTSE 100 currently trading at around the 6000 mark. The past week saw little in the way of corporate reporting with the highlight being another housebuilder Crest Nicholson who increased their full year dividend by 38%. Slightly worrying for Diageo shareholders was the move to increase its interim dividend by only 5% after three consecutive years of 9% increases. We are maintaining our final dividend forecast, which will give an increase for the year as a whole of just over 7%. If the rate of increase of 5% becomes the norm, then they look stretched on a PE of over 20x. This morning ENTU reported their results and declared a dividend of 2.67p making for a total dividend for the year of 5.34p against a share price of 56p. They said in their results statement:
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