Friday Email: 12 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:
The very bad start to 2016 for the markets has continued this past week as panic has continued to dominate the markets as relatively unconvincing stories of financial armaggedon are doing the rounds over the past few days. Bears are searching for all sorts of reasons to continue the sell off. For most of the year it has been the oil price. Over the past couple of days it has been the financials and the Central banks inability to have any further impact. Last week it was worries over China's foreign reserves falling too quickly, but that has gone quiet this week with the markets shut over there for the New Year celebrations. Whatever concern is raised next, the bears are winning hands down at the moment and stock markets are now in very oversold territory.
We had 12 dividend declarations during the week and some of the reductions being signalled by the market came. Although Rio Tinto maintained its dividend for the 2015 fiscal year, they have acknowledged that they cannot go on paying at that level with commodities prices where they are. So a minimum of 110 US cents for 2016 has been promised. It will be a disappointment to shareholders that the progressive dividend policy thropughout the Economic Cycle has been scrapped, but they need to keep the balance sheet strong and in the future when the current situation has normalised Rio shareholders will have their day in the sun again. Over the past 5 years it should be noted that they have returned almost their current Market Capitalisation to shareholders. ($25 billion) Rolls Royce also halved their final dividend payout this morning and will do so in the first half of next year.
On the bright side we saw the cash generative Dunelm continue to return excess cash to shareholders with a 9.1% increase in their ordinary dividend plus a special dividend. ARM holdings increased their full year dividend by more than 20% for the fifth year running. Expect the same again next year after a very bullish outlook. Redrow doubled their final dividend for the second year in succession. Randgold (Yes. A miner!!) increased their dividend by 10%. Shire and Henderson Group also increased by double digits.
The week ahead has a similar amount of reporting activity as the past week. Will the fear recede? It is very difficult to say when it will especially now that the In / Out debate on Europe is starting which will cause more uncertainty in the markets. For sure there are now real opportunities to pick up excellent companies at good prices. Even the likes of ARM after very good results this week and a very positive outlook for 2016 are trading at a 52 week low. Similarly Next, who will drive up EPS in the coming months by making share repurchases with surplus cash. Retail sales were far more than expected in January. The list goes on and on. Very little has escaped the carnage as fear currently dominates.
Additions to DividendMax at the request of members include Dee Valley non-voting, HSS Hire, Netcall and Newriver retail.
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: 05 February 2016
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.