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Friday Email: 22 April 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:

After a sharp drop on Monday morning to 6299 following the failed Doha talks, the FTSE 100 recovered its poise and so did the oil price which hit $46 a barrel on Thursday morning. The price then began to fall and so did the FTSE 100, which ended the day down about 30 points, exacerbated by the ex-dividend factor. The futures at the moment are showing further falls this morning. The net result of this is we are up about 20 points on the week.

The past week was very quiet in terms of declarations with Saga producing a 75.6% increase in its final dividend, but the comparables were against its maidend dividend after the IPO. Utilitywise, who featured in our recent write up produced a 29% increase in their interim dividend.

The week ahead picks up a bit and it will be interesting to see how GVC are getting on with the Bwin acquisition. Hopefully, they will give some indication as to when they expect to resume dividend payments. There are around 40 companies going ex dividend this Thursday and there are some good yields in there.

The performance of ITV has been puzzling given that that the yield from the upcoming dividends (going ex on Thursday 28th) is now 6.2%. Given their optimism for the coming year and its reasonable rating, I can only conclude that the market is unhappy with the possible takeover of Entertainment One. This is strange given that the acquisition, were it to occur, would be earnings accretive up to a price of around 250p. Perhaps the market is thinking that they will need to pay a lot more than that. At 250p, it is over a billion quid, which could mean the end of special dividends for a while. They will pay out £400 million for the upcoming special dividend, so only two and a half years to pay for the acquisition if they stop the specials. They would also acquire up to around £350 million of debt with the deal, but this is small for a company with ITV's strong cash flows. Any price below 250p looks like a very good deal for ITV. Above 300p starts to look pricey. Medium to long term, it would be a very good deal to pull off.

Nice to see Ashtead on the comeback trail after some very harsh treatment by the markets. Yesterday they said that full year earnings will come in at the top end of analysts expectations.

This email was originally sent on Friday 22 April 2016

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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