Diverse Income Share Discussion Threads

[grupo] 16/7/2017 10:10

2 overlooked FTSE 100 champions you could retire on

Rupert Hargreaves | Sunday, 16th July, 2017 | More on: INF SDR
Image: Public domain

Even though the company is a member of the FTSE 100, Informa (LSE: INF) is overlooked by most investors. With a market capitalisation of £5.5bn, the company is one of the UK’s biggest businesses, but its day-to-day operations are hardly exciting.

Informa runs international exhibitions, events and produces business/academic publications. Even though there is a high demand for these services, growth is slow and steady, which isn’t exciting. But it’s perfect for long-term investors who want to achieve capital growth and income with minimal risk.
Steady growth

Over the past four years, earnings per share have pushed steadily higher, rising from 35.2p for 2012 to 42.1p for 2016. City analysts are expecting the company to report earnings per share of 47p this year, up 12% year-on-year. At the same time, shares in the company support a dividend yield of 3% and the payout of 20.3p per share is covered 2.3 times by EPS. For 2018 analysts have pencilled in earnings per share growth of 7%.

Considering the company’s historic growth and current level of dividend income, today’s valuation of 14.2 times forward earnings seems to be about right. If the group can continue to grow earnings at a rate of 5% to 10% per annum for the foreseeable future, and the valuation remains the same, investors should be able to pocket a double-digit annual return from both capital growth and income.

Overall, the numbers seem to show that your portfolio might benefit from owning Informa.
Long term growth

The best stocks to retire on are those that have a long-term business model and asset managers, and pension providers are a great example.

Schroders (LSE: SDR) has seen profits explode over the past five years as more customers flocked to the company’s offer. Since 2012 earnings per share have risen by around 100% (based on city estimates for 2017). This growth has translated into impressive returns for shareholders with shares in the firm up 150% over the past five years excluding dividends.

City analysts are expecting the company’s steady growth to continue in the years ahead. Mid-single-digit earnings per share growth is predicted every year for the next three years, and I doubt that the growth will stop there. As one of the UK’s largest wealth managers, Schroders is well placed to capture more business as the country’s wealth rises.

With further growth on the horizon, it looks as if shareholders will continue to reap the rewards for many years.

At the time of writing, shares in the company trade at a forward P/E of 15.7, an undemanding multiple considering Schroders’ growth over the past five years and future potential. The shares also support a dividend yield of 3.2%. The payout is covered twice by EPS. These figures indicate that just like Informa, shares in Schroders could generate a return of 10% per annum or more for investors in the future. Once again, these returns indicate that Schroders could be a great investment to wake up your portfolio.

[grupo] 11/7/2017 19:54

Jun 29, 2017

On Thursday, July 27 2017 at 07.00 BST (08.00 CEST and 02.00 EDT) Royal Dutch Shell plc will release its second quarter results and second quarter interim dividend announcement for 2017.

These announcements will be available on

[aleman] 27/6/2017 11:35

UK yield options are starting to improve but you have to be careful. There is increasing choice as mid-cap profit warnings are taking more shares down. There are now 19 FTSE350 stocks with historic yields over 6% and another 19 yield between 5 and 6%.

[aleman] 20/6/2017 12:01

For information only. No recemmenation intended.

[maywillow] 12/6/2017 19:38

Royal Dutch Shell plc First Quarter 2017 Euro and GBP Equivalent Dividend Payments

News provided by
Royal Dutch Shell plc

12:24 ET

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THE HAGUE, the Netherlands, June 12, 2017 /PRNewswire/ --

The Board of Royal Dutch Shell plc ("RDS") (NYSE: RDS.A)(NYSE: RDS.B) today announced the pounds sterling and euro equivalent dividend payments in respect of the first quarter 2017 interim dividend, which was announced on May 4, 2017 at US$0.47 per A ordinary share ("A Share") and B ordinary share ("B Share").

Dividends on A Shares will be paid, by default, in euro at the rate of €0.4194 per A Share. Holders of A Shares who have validly submitted pounds sterling currency elections by June 5, 2017 will be entitled to a dividend of 37.12p per A Share.

Dividends on B Shares will be paid, by default, in pounds sterling at the rate of 37.12p per B Share. Holders of B Shares who have validly submitted euro currency elections by June 5, 2017 will be entitled to a dividend of €0.4194 per B Share.

This dividend will be payable on June 26, 2017 to those members whose names were on the Register of Members on May 19, 2017.

Taxation - cash dividend

Cash dividends on A Shares will be subject to the deduction of Dutch dividend withholding tax at the rate of 15%, which may be reduced in certain circumstances. Based on a policy statement issued by the Dutch Ministry of Finance on April 29, 2016 (which has been formalised in law with effect from January 2017), and depending on their particular circumstances, non-Dutch resident shareholders may be entitled to a full or partial refund of Dutch dividend withholding tax. As from 2018, Dutch and non-Dutch resident shareholders who are exempt from corporate income tax may elect for an exemption from Dutch dividend withholding tax instead of requesting a refund if tax was withheld.

Furthermore, in April 2016, there were changes to the UK taxation of dividends. The dividend tax credit was abolished, and a new tax free dividend allowance introduced. Dividend income in excess of the allowance is taxable at the following rates: 7.5% within the basic rate band; 32.5% within the higher rate band; and 38.1% on dividend income taxable at the additional rate.

If you are uncertain as to the tax treatment of any dividends you should consult your own tax advisor.

[maywillow] 12/6/2017 15:33

Cheers Aleman

TXH

According advfn it seems historically sound

with a decent nbv of approx 148p per share with a smigen better of cash at DEC 2015


as mentioned by you, the illiquidity factor may put many off together with not
being one of the european blue chips

i prefer euro french

good luck fella

[aleman] 12/6/2017 13:37

I think the tendency here is probably towards large mature companies with big dividends but I think TXH is worth a mention. It's cheap on cashflows and has a strong balance sheet and fat dividend. The balance sheet is beginning to look strong enough that there could be another special dividend if the directors are still thinking the same as two years ago. Just be aware, it's a smallcap with limited liquidity, the directors are getting very old, and they tried to take it private a few years back. The valuation, yield and balance sheet make it look worth a small portion of a portfolio for diversification purposes unless you have a very large portfolio, in which case the limited liquidity could be a problem. That might improve if the shares keep going up, though.

[the grumpy old men] 09/6/2017 07:34

ST GOBAIN


9/06/2017 | 8:03

The Combined General Meeting of the shareholders of Compagnie de Saint-Gobain approved all resolutions. It approved the distribution of a dividend of € 1.26 per share (compared with € 1.24 in 2016), with a full payment in cash. The dividend will be detached from the share on June 12 and will be paid as of June 14, 2017. The directorships of Pamela Knapp and Agnès Lemarchand and Gilles Schnepp and Philippe Varin, all qualified as independent directors, Also been renewed.

Following the departure of Jean-Martin Folz and Bernard Gautier, whose experience and judgment contributed greatly to the debates and decisions of Compagnie de Saint-Gobain's Board of Directors, it now has 14 members, including two directors employees.

[waldron] 30/5/2017 13:05

Shell and BP dividend ‘looks more sustainable’, says top income investor
News
30 May 2017

Simon Gergel, who runs the Merchants Investment Trust, which has a yield of 4.9 per cent, has revealed the reason why he remains keen on the shares of oil giants BP and Shell.

COMMENT

Gergel: Shell and BP dividends ‘look more sustainable’

Gergel sees dividend potential in BP shares
David Thorpe
David Thorpe

Shell is the largest investment in the £702 million Merchants Investment Trust.

Gergel commented, ‘the big oil companies have cut their capital expenditure to the extent that they can now pay the dividend from the cash they generate and also can pay for the investment they make. The dividend is more sustainable now that it has been for some time, and it may be that we get a higher oil price from here as well, offering a further boost to earnings.’

In contrast he is rather less keen on the investment case for the UK housebuilders, commenting, ‘whilst the companies themselves look to be trading on cheap valuations, they are trading at a premium to the value of their net assets. Its not that we are particularly negative on the housebuilders as a sector, but the shares have gone up a lot.

He added that he is ‘relatively optimistic’ about the outlook for the UK consumer, remarking that, ‘unemployment is low, and the living wage increase will put more money in people’s pockets.’

Read more: Alex Wright: The best ‘defensiveR17; shares for investors today

Amongst the stocks he likes with exposure to the UK consumer are Greene King, a pub company of which he commented, ‘they are showing real earnings growth since the acquisition of Spirit (a rival pub company).’

He has relatively less exposure to the mining sector than does his peer group as a whole, but does have investments in BHP Billiton and Antofagasta, both mining companies that have performed well of late.

Read more: JP Morgan: It’s unlikely UK interest rates will rise in the next year

The Merchants Investment Trust has returned 29 per cent over the past year, compared with 22 per cent for the average trust in the AIC UK Equity Income sector in the same time period. It trades at a discount to net assets of 4.9 per cent.

The largest investments in the trust are Glaxosmithkline and Royal Dutch Shell.

[waldron] 30/5/2017 13:05

cheers aleman

[robow] 08/5/2017 11:51

Yep still here

[shavian] 08/5/2017 08:35

Anybody still here? New ATH for DIVI this morning. Very sound core holding imo

[aleman] 28/4/2017 16:37

Connect Group (CNCT) 126.5p

Year Ending Revenue (£m) Pre-tax (£m) EPS P/E PEG DPS Grth. Div Yield
2017-08-31 1,825.06 54.91 17.77p 7.7 -0.8 -10% 9.80p 7.7%
2018-08-31 1,791.26 58.46 18.77p 7.2 1.3 6% 10.13p 8.0%

[aleman] 28/4/2017 16:10

hxxp://www.sharecast.com/news/hsbc-maintains-go-ahead-group-buy-rating-but-cuts-target-price/25628605.html

[waldron] 25/4/2017 21:09

Royal Dutch Shell: Dividend Is Safe
Apr. 20, 2017 11:55 AM ET|
41 comments|
About: Royal Dutch Shell plc (RDS.A), Includes: RDS.B
Searching For Value
Searching For Value
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Summary

Royal Dutch Shell's lack of FCF has caused concern among shareholders about whether the high dividend yield is safe.

Recently, a lot of improvement has been made, with a strong yoy increase of the production rate.

The last two quarters, more than enough FCF was generated to pay its dividends.

From now on it appears that the company will see its results improve further.

Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) has long been a go-to stock for long term investors. With a current dividend yield of over 7%, the stock seems as attractive as ever to long term investors. But a lack of cash flow along with an uncertain operating environment have been cause for concern among investors about whether the company will be able to keep paying out its current dividend without damaging balance sheet too much. There are definitely risks associated with investing in this stock, but I believe that Royal Dutch Shell is making the right moves to improve its business and keep its dividend safe.

Lack of FCF

While Royal Dutch Shell has seen a steady uptrend in its dividend per share, its FCF has been lacking for years with an extra difficult time because of the downturn in the energy markets since 2014. As FCF has worsened, the company decided to still improve or maintain its dividend per share. This has caused the company to see a quite negative FCF after cash spent on dividends:

While it might keep shareholders somewhat happy, if it goes on for too long more and more shareholders will ask themselves whether the company is not destroying its balance sheet with these actions. I have seen multiple titles on Seeking Alpha stating exactly this, and believing that the dividend yield simply is not sustainable. However, I believe that the company is actually steering in the right direction in terms of generating more and stable cash flows.

Lower cost and expenses

While Royal Dutch Shell's CFO has declined quite a bit these last few years the same goes for its CAPEX, causing FCF to be fairly close to breakeven.

Management has been able to lower its CAPEX thus far that it is currently seeing lower CAPEX for Royall Dutch Shell and BG combined than Royal Dutch Shell had two years earlier on its own. The same goes for the operating cost. An example of the cost cutting efforts are the 6,500 reduction in number of employees. Management had this to say on the matter during the most recent earnings call:

"Compared to 2014, and that's including BG, our underlying operating costs have been reduced by $10 billion on an annual basis, and our capital investments have been reduced by $20 billion on an annual basis. end of 2016, we are running the underlying operating cost of the combination of Shell and BG below $40 billion, so that is lower than what we used to run Shell on as a standalone company less than 24 months ago. In 2017, it's expected to be lower again."

This lower cost and expenses structure lowers the impact that the troubled energy market has had on the company. But in order to survive and thrive, Royal Dutch Shell needs more than just cost cutting.

Raising cash

Another way that management is currently trying to improve its financial health is by selling assets. The goal is to raise $30 bln between 2016 and 2018. So far management seems to be very positive about the progress that has been made. $5 bln of the $30 bln has been completed in 2016 with more to come:

"We just announced in the last few weeks a further $5 billion, and we are making very significant progress on yet another $5 billion of divestment and then a bit more to come on top of it."

Investing in growth

Investing in future growth opportunities is also something that Royal Dutch Shell deems to be very important. Despite lower CAPEX, the company is still positioning itself for medium and long term growth.

One of the ways that management attempted to achieve this goal was by the acquisition of BG. The integration of BG was completed last year. This acquisition is expected to accelerate the growth strategy in both Deep Water and in LNG. Thus far, BG has improved FCF while creating a platform from which the entire company can be reshaped. Last year BG was FCF positive as expected. From now on this acquisition is expected to see strong growth going forward:

"BG was free cash flow positive for us last year. As a result, two years ago we said $2.5 billion. We actually pretty much did that last year in 2016. We now expect $4.5 billion pre-tax basis by 2018, so we did the three-year target in one. And this year in 2017, we should get to around $4 billion for the synergies delivered."

Industry conditions

Since 2014 a big reason for the company's troubles has been the decline in energy prices. Now that this has been making a comeback since the beginning of next year, the company is already seeing improvements in its current business, with more expected as the oil price remains above $50. The most troublesome thing about this company, according to investors, was whether it could keep paying its dividends because of the low FCF. These past two quarters have actually seen so much improvement that the company was able to pay its dividends from its FCF and still have some cash left. Combined over these two quarters, the company had a positive FCF after dividends of $1.5 bln So we are already seeing that this does not have to be a real problem anymore if the company keeps continuing the same course.

Now that the cost and expenses structure has improved along with relatively more stable energy prices, the company can increase its production once again. This is exactly what has happened recently. In the fourth quarter of 2016, a strong 28% yoy increase in production was realized. With this growth, the average daily production rate was 3.9 mln boe. It is expected that this rate will increase to 4.0 mln boe per day in the near future.

Conclusion

So the company is already FCF positive after its dividends. Now, it is in a position where its operating environment is improving, which will result in even higher cash flows in the future. Therefore I believe that the current high dividend yield of the stock is safe. And because a dividend yield of 7% that is sustainable is more than enough return over the long term, investors should seriously consider buying this stock.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

[grupo guitarlumber] 17/4/2017 07:17

Do dividends still not lie? (A word to the Weiss)
13:32 17 Feb 2017
Dividends
Dividends don't lie, according to investment guru Geraldine Weiss

‘Dividends Don’t Lie: Finding Value in Blue-Chip Stocks” is a well-regarded book by Geraldine Weiss, the former editor of the newsletter, Investment Quality Trends.

While the rest of the investment world was focusing on price/earnings ratios – the share price divided by the earnings per share – back in the seventies and eighties Weiss was championing an investment strategy that focused on the dividend yield – dividend as a percentage of share price – of blue chip companies.

In particular, she looked for companies with a yield that was close to the top end the historical range, which she regarded as a potential ‘buy’ signal. Likewise, stocks with a yield that was towards the bottom of the range were regarded as overvalued.

There were a number of other filters she looked for, many of which we will look at in this article.

The book was written in 1990, since when everyone and his dog has gained access to share prices and the computing power to crunch the numbers. In theory, therefore, the chances of a strict application of Weiss’s filters turning up undiscovered gems are practically zero, as the minute any stock falls into buying range, the algorithmic trading automatons at the big investment banks and fund managers should pile in.

Instead, we are going to investigate what I have called the Geraldine Weiss Champion Hurdle, applying additional filters as we go along and seeing which ones fall at a particular hurdle, and which ones run on.
Hurdle number 1: Does it pay a dividend?

There are 967 stocks on the LSE that have a dividend yield, which is to say they paid a dividend in the last 12 months.

Excluding venture capital trusts (which are closed-end private equity investment schemes), the highest yielder is Trading Emissions PLC (LON:TRE), the solar power company that is selling off a portion of its Italian solar portfolio and returning cash to shareholders.

Valued at just over £5mln, it is no one’s idea of a blue-chip.

Of the FTSE 350 stocks, Talktalk Telecom Group PLC (LON:TALK) is the highest yielder at 9.7%. My old mum used to say to me (well, let’s imagine she did for the sake of this article) beware of any stock yielding more than 7%, as it means the market thinks a dividend cut is on the way.

Weiss had a filter for sniffing out potential dividend cuts that we’ll get to in a later article, but for information purposes only the other FTSE 350 stocks yielding more than 7% are: Redefine International, Carillion, Pearson, Aberdeen Asset Management, P2P Global Investments, Centamin, Cobham and NEX Group.
2. Is it yielding more than its average yield over the last 10 years?

About half of the ‘horses’ fall at this particular hurdle, reducing the field to 499. Of the FTSE 350 runners & riders, Redefine and NEX Group fail to make the cut.
3. Is the yield towards the top end of the historical 10 year range?

Restricting the selection to those stocks yielding 1.5 times their 10-year average yield cuts the list to 190 stocks.

A number of stocks catch the eye yielding many times their historical average; this can either be a good sign – signifying handsome dividend growth – or a bad sign, signifying the market thinks the divi is not copper-bottomed.

In the case of Newmark Security PLC (LON:TCM), for instance, which is yielding 3.3 times its historical average, the signs look positive as the company upped its dividend in 2014 and 2015 and maintained it in 2016, despite issuing a profit warning last year.

A bit more digging would be necessary to determine whether Newmark is worth buying, but under Weiss’s system – or at least the parts of it we have applied so far – it might be that the profit warning has battered the share price enough for the stock to be worth pocketing for the dividend.

In the case of Fairpoint Group, yielding 5.9 times its historical average, the signs are negative, as the company has signalled it will suspend dividend payments until new management has righted the ship.
4. Does it have a record of growing dividends over the last 10 years?

Weiss apparently looked for stocks that had raised dividends at a compound annual rate of at least 10% over the past 12 years.

Our data only goes back 10 years, so a compound annual increase of at least 10% over that period equates to an aggregate increase of about 160%.

That filter reduces the size of the list to 31 stocks. Oilfield support services firm Petrofac Limited (LON:PFC) was the stock to own over the last 10 years for dividend growth, with the divi up (in sterling terms) from 8.15p in 2007 to 46.87p in 2015/6.
5. Is it selling for two times less than book value?

Proving that Weiss was not totally averse to looking at the fundamental value of a company, she liked to filter out stocks that were valued at more than twice their book value (or net asset value, if you prefer).

This hurdle knocks another nine runners out of the race, leaving 22.

Again, excluding venture capital trusts, the cheapest stock appears to be Pebble Beach Systems Group PLC (LON:PEB), the software and technology company formerly known as Vislink.

As the company announced earlier this week it would be restructuring and parting company with its executive chairman after putting out a profit warning earlier this month, it is probably safe to assume this one would not meet Weiss’s definition of a “blue chip company”.
6. Is it trading on an earnings multiple of less than 20?

Everyone likes a bargain, and Weiss was apparently no exception, though I am not sure why she chose the cut-off point of a price/earnings ratio of 20.

We’re getting down to the nitty-gritty now, with just nine survivors. Screening out venture capital trusts leaves just five, and one of those is Pebble Beach, so in reality we are down to just four companies in what has been more like a steeplechase than a hurdle race.

Those four are (drum roll, please): Mitie Group PLC (LON:MTO), Aberdeen Asset Management PLC (LON:ADN), RPS Group PLC (LON:RPS) and UNITE Group PLC (LON:UTG).

All of those are worth looking at in more detail and applying a few more of Weiss’s filters, to see whether they make the grade, but that will have to wait for another day.

[leading] 11/4/2017 09:58

Jeffian,

Interesting question. The situation for institutional investors is the most important in determining behaviour for listed companies. Assuming that an institution is chargeable to Corporation Tax, dividend income is tax free for the recipient (as the payer is paying out of taxed income). The institutional position is unchanged by the tax change, I think. The tax credit prior to 5/4/16 was just a book-keeping exercise for institutions, with no real effect. Therefore, I do not expect to see a change in dividend paying behaviour for listed companies.

For private companies with a few individual shareholders, they (the shareholders)have had a tax increase as you say, but there isn't much they can do about it. Dividends remain the most tax efficient way of distributing income as NI is avoided (both employers and employees contributions).

The elephant in the room is entrepreneur's relief. CGT at 10% on a gain of up to £10m. Private company shareholders will be tempted not to distribute profits, but to target an eventual disposal of the business instead. However, it is risky leaving your money to accumulate in a company, potentially exposed to future business risks not to mention all sorts of spurious claims.

[aleman] 11/4/2017 09:23

TXH dividend increased from 7p to 8.5p for a 6.4% yield.