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Strictly,
Thank you for your thoughts. I certainly will have to sell a few to make up for the significant loss of income this year. I still think that the management do not give a toss for private shareholders.
Strictly - on this point about a company's earnings per share not fully translating into the equivalent equity growth.
The first question must be, where do the evaporated earnings go, given that such evaporations are seemingly somehow allowed under accounting rules. They don't go to intangibles from a business purchase as that would show as intangibles above the asset value of the purchase, they don't go as depreciation or amortisation, as this would be deducted from earnings as well. Further capitalised spend would surely show as an asset and non capitalised spend would be treated as an expense or cost, so how can the earnings not translate into balance sheet equivalence without the practice being fraudulent?
Jake,
I had a look back at a few of your posts before writing this, and I can see that, as well as being a long term holder of Bellway shares, you have also had a concern over the level of dividends.
If you've read any of my posts here, you'd soon see that I only invest in house builders.
And Bellway is currently my largest holding - so our interests here are aligned!
I have a few points to make, that may or may not give some encouragement.
I have records on Bellway going back nearly four decades to 1983, and they have been the ONLY house builder of those that I track to have paid a dividend every year including going through the credit crunch.
They have also been the most consistent in their dividend policy.... give or take, they pay out around a third of earnings in dividends. From 1983 to 2020, their total EPS are 3,295p and their total dividend payments are 1,004p.
Of the big boys, they have been the only house builder as far as I pay attention to that have not got caught up in the "me too" malarkey of overpaying on dividend to entice the seemingly large numbers of share holders in various companies who place a big significance on this without, it seems, necessarily looking past that into the important numbers.
At lower rate tax, given that the gap between dividend tax and capital gains tax is now only 2.5% and that there's a substantial capital gains tax allowance to blend in, and given that the higher rate is 32.5% on dividends but currently only 20% on capital gains, overall one would have to say that the tax on capital gains is more favourable than on dividends outside of an ISA or SIPP.
And, apart from the above, outside of any company's shares selling at less than book value ~ which would generally indicate some sort of crisis during which the company may well not be paying dividends anyway ~ it makes more financial sense to cash in shares than for a company to be paying a dividend anyway.
So I would prefer that Bellway paid no dividend.
For share holders in a company like Persimmon, that has been selling for around 3 x book or more, it's a bl..dy nightmare, as, providing they could have otherwise retained that money and grown the business more rapidly and at the same level of profitability, and providing they could have retained their market esteem to the extent that their shares still sold at 3 x book, their shareholders would have been three times better off on the amount they'd received as dividends.
That's one of several reasons why I haven't held Persimmon shares for some time.
Of course, no doubt many share holders in Persimmon wouldn't see things this way.... but then they may not have thought through the numbers?
And, finally, I would rest my case on the fact that Warren Buffett's Berkshire Hathaway has never paid a dividend.
And Buffett's hardly renowned for being an investing slouch, is he..?
Strictly
Not looking good for tomorrow. I'm beginning to wonder about the management of this company. I've held for decades and was always content but not now. AGMs at 8.30 a.m. really help to keep us away.
"Strictly....any comments on todays RNS?"
..............................
Terrace, I'm guessing you've seen my comment on the blog today anyway, but IMO essentially it's a similar story all round for the players in the sector that I'm interested in - that is, BWY, RDW, CRST & INL and, to a lesser extent, BDEV & TW.
Give or take, they've all effectively been treading water for a half year of profits and, for that, plus quite possibly slimmer profits for the near future, they've taken varying levels of market punishment ~ from a 25% drop in price year to date for BDEV to a 45% drop for CRST, and that's after Crest's stonking performance this month to date which has encouraged me to start moving some across to INL.
Right now, with assessed BVPS for October, I've got BWY at just over book and RDW at just under book - which is why I'm not yet holding any BWY, though they are moving closer to the zone and, if today's market downer on BWY continues this week then, who knows?
I'm allowing for all the above companies dropping to around 10% ROE over the next year or two..... this may be over-cautious but, for me, it doesn't really matter if it's a sector wide margin of error - by which I mean I'm similarly out on all of them.
Given that I have a significant holding in CRST and a smaller, but still significant, holding in INL, and given that CRST's year end is in just ten days' time and INL's was just twenty days ago, I'm certainly looking forward to their next updates.
Particularly in the case of CRST as their second half is now all post covid shutdown and their consequent balance sheet hits taken ~ and hopefully they've kitchen-sinked their numbers now? ~ so we might get some sort of realistic sense of how profitable these companies currently are given that they are probably still hampered to some degree by covid work practices on site..? (I reckon some of the regulars on TW. share chat would have a far better idea on that than me as there are several building trades people now commenting there so they will now doubt have a perspective from the sharp end).
As for the sixty four dollar question, though - I mean: Is there another market price down wave to come..?
I have absolutely no idea, but if the above suggested outlined scenario is valid as a minimum ~ I mean, that the builders have taken the big one-off costs of covid and are now on for a bottom double digit return and growing profitability back from there, well, paying around book for the bigger boys and somewhat less for Crest and Inland doesn't seem unreasonable...
Does it..?
As ever, that old b.st.rd, Captain Hindsight, is never around when you need him..!
Strictly
Strictly....any comments on todays RNS?
Could it really be 2 or 3 years before EPS return to pre covid levels?
Well, it maybe will. It's only us shareholders who bear a financial loss.
Great outlook so am expecting sp to rise. We shall see.
Not impressed at all. Measly dividend, one-third of last year's.
Moving back up after quite a slide. Next news 20 October. I sincerely hope they decide to toss us PIs a few crumbs. Thinking about it , the instis probably want some returns also so we may get some. Hoping for 100p personally.
Think a good idea , if more shares ,had ideas like that ,how good would it be for the stock market ,as well as UK employment
They are rated 5* by somebody. Also a shareholder discount is available but check the details
They are rated 5* by somebody. Also a shareholder discount is available but check the details
I emailed the company yesterday about my concerns and have just had a reply. Re cancellation of the dividend, just blah blah. Re not using the furlough scheme, they said that that as many staff stayed at work the benefit would not have been great. More importantly imv they say that not using the scheme left them more freedom on the dividend front in future. I have asked that my concerns about the dividend be relayed to the Board. I encourage others to do the same......
Horrendous sign up process for LSE!
Can someone please explain how BWY have “preserved liquidity and the balance sheet” by not claiming furlough and paying all employees out of their own funds and donating the board’s pay cut to charity? ???????
Couldn't agree more. The divi is/was a big part of my income and I'm not happy.
Niige
I think Bellway is a Steady Eddie of a share. Wouldn't mind it being a bit more flash . I'd also like my deferred July dividend !
Hi jake
Just noticed psn Sp 2629 has overtaken bwy 2619. Either psn doing very well or bwy doing badly. Or psn overvalued or bwy undervalued, or some sort of combination of the above. Psn Per 9.8, bwy 6.0 makes me think psn overvalued.
BoL
Big recommend in the Sunday Telegraph today.
Awful results and dismal forward looking comments from Crest,who have shown themselves to be accident prone in the past.Disappointing that with a market cap of £585m,they have wiped about £1000m of the value of their quoted peers which have a combined market cap of about £ 32000m.
Crest Nicholsons results announcement tomorrow morning will throw a bit more light on how the industry is faring during these conditions.
Seems like I'm more optimistic than you for 2020 but more pessimistic for 2021. I had assumed house price reductions of about 10% starting from this summer and lasting a year. But no sign yet of it happening to that extent. Maybe I need to look at that again, perhaps it will happen but later? I'm certainly hoping/expecting Boris will try to turbo charge house building - dressed up in some 'levelling up agenda' terms. For sure there's a huge multiplier effect with all the knock on benefits you mention. Brexit is still out there of course as an unknown.
not really Demos but because of the covid measures on site and sales reduced,it would not surprise me to see EPS for the current year at about 60% of pre virus level for the current year and 80% next year.It would be useful if the government would introduce some measures to assist the new homes market because the knock on effect of a healthy market is huge for a large number of industries....carpets,curtains,white goods,building materials,removal firms,solicitors,mortgage lenders,tradesmen,utility companies,garden nurseries,etc,etc.
Terrace, do you have a view on 2020 EPS?