Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
To provide investors with a high gross dividend yield and the potential for capital growth by investing predominantly in fixed interest securities.
Find out MoreLondon South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Exactly correct . Difficult to match the yield in any other stock so clearly risks as always . The mechanism you describe is accurate and the defensive reserves of investment trusts are what we investment trust fans have always emphasised in our choices . I am a big investor here and will stay put or even accumulate on downtrends
Well, the 6-month update is in. Overall, the situation is much as-you-were. It's not bad, but it's not great either. Firstly, the actual figures:
"For the six months to 31 December 2021 the revenue account earnings per share were 2.09p compared to 2.12p for the same period last year." As I said, not bad but not great either.
What's been happening? Well, as we knew, many of the bonds were being called whilst rates were low and being refinanced:
"Typically, this means that the higher yielding bond is "called" by the relevant company and replaced with a lower yielding instrument. For New City High Yield this means that we can get a capital uplift as the bond is repaid at a higher price but means that we have to replace the yield as the new instrument normally has a much lower interest rate."
We knew that was happening, but still a problem if inflation swings wildly up and wildly down. It would be nice if some of the refinancing occurred when it was favorable to NCYF (and us!).
But on the most important subject of dividends:
"As things stand, the Board expects to follow the same pattern of dividend payments as declared last year and maintain or slightly increase the total level of dividends for the year. Based on an annual rate of 4.47 pence and a share price of 55.4 pence at the time of writing, this represents a dividend yield of 8.07%. Should earnings fall below the anticipated annual dividend amount, the Board is prepared to use a modest amount of reserves to make up a marginal shortfall and believes that this will be the most likely scenario for the next few years. The Board pays great attention to dividend payments, receiving regular feedback from shareholders on their importance. Since its launch in 2007, the level of dividends paid by the Company has increased every year."
So I would say that means they expect earnings will not be fully covered, possibly for a few years, but they will use the reserve fund to keep increasing the final Q4 dividend by the minimum amount of 0.01p. And then they will say; but we've increased the dividend every year!
Overall, dividends have only risen by just over 1% over the last 4 years when I suspect cumulative inflation is over 10%. So in real terms, it is dropping. But the dividend yield is still high I guess. Hard to replace from anywhere else.
Guitarsolo - still holding
Hi Mr Solo, on the litigation front I meant more directly than holding the shares of an IT. I've dabbled with investing directly into to the litigation process. Well, the special vehicles set up to provide a corporate curtain and fund individual cases.
Usually as part of that process you get an external "valuation/risk reward" advice and look to see what the insurers are offering as way of cover in case the case is lost. After that, it applying some commercial judgement, DD and common sense, a well as a big dose of risk evaluations.
If it helps, there appear an growing interest from the US over VOD and it's done a recent deal with Elon Musk's satellite business if you believe the speculation and some media reported wins in health care. The recent digital conference material is interesting. It's on VOD's site.
The 400%! I was mildly disappointed with that, but in the context over present markets, I can't complain.
Interesting times at VSL. There could be more down the track with that particular little win, it's moved up sharply, the US listed vehicle and I wouldn't be surprised if it runs further, that could benefit VSL more over the short term, but I guess they have some form of lock-in that doesn't allow them to exit any time soon.
"The Company's Class A Common Stock shall be subject to a one-year post-closing lockup unless otherwise accelerated based on average trading performance measured six months post-closing."
Hi Devon, well there's a lot in that post! To answer a couple of points you raised:
- Litigation funding. I have dabbled in here before with the likes of Juridica Investments (got it, got out for small profit!). I've also looked into Manolete Partners but it was too expensive for the potential returns. If you can live with the idea of actually encouraging lawyers to pursue claims (!) then it's an area of interest. But I don't quite know how to assess value etc.
- Vodafone! I have some of these in my mother-in-law's account! They're way underwater but I see quite a lot of research that suggests the future cost of infrastructure investment will begin to wane (pipe dream!). But such a big beast has to come good eventually. I just wish they had lower debt.
Rea: Thanks for confirming you think it is the same coupon. If that has been paid to NCYF post results it would bring the 4.18pps report up closer to the dividend. I'll hope that was a factor why they felt OK to keep the dividend going.
Other: Impressed by your 400%!
All the best,
Guitarsolo (stuck in East Devon!)
https://production-matalanlive-assets.s3-eu-west-1.amazonaws.com/uploads/asset_file/asset_file/362063/1634312978.9171162-Matalan_Q2_FY22_Press_Release_Final.pdf
Matalan update.
"I mentioned in last year's report that the most notable investment negatively affected by COVID-19 issues was Matalan Finance where the company was badly affected by the lockdown and its bond price fell to 41 as at the end of June 2020. We believe that this security will recover, have remained holders throughout the year and have seen the bond price recover to 60 at our year end. "
Senior is close to par @95%
Second Lien @65% c30 YTM
Hi Mr Solo, yes I believe it is the same REA Pref's and so the same coupon. I also own some of their Sterling Bonds.
I'll check out your Volta post! Yes it's been a stella performance from PEY/S and I just added a few more VLS in the last few days, I've always rated them , even when we were under water!
My most recent investment has been in private equity in a growth market, so I'm keeping my fingers crossed. I've had one reprice in the last few days and it's given me a healthy x4 (before SEIS and EIS uplift). You can't sniff at 400%!
I need to think about opening a Euro account somewhere. I've had my eye on Volta for ages, but never quite pressed the button. Interestingly, I've been giving a little bit of thought to MYI, not sure if it's got the yield kick you like, but I think it might be a sensible play in the current state of the game.
On the subject if REA, I see there's been a new buyer come to the common stock today, I guess it attractive in the world of $100 petrol, they use a lot of palm oil as fuel over there. I keep thinking about initiating a position that would put me across the whole cap table.
I just added a bit of debt from these guys: Modulaire https://www.modulairegroup.com/ bought around par with a 6% plus yield. Government money is going their wayand it's quick to deploy their kit in an age of labour shortages.
On the subject of esoteric income, Volta, have you ever considered Litigation Funding? There's a crowd who offer it to retail investors and the returns, and losses, can be "stella" https://www.axiafunder.com/
Losses have the potential of being greater than the capital committed, but so far they've won the majority of the cases!
I seen to remember seeing chatter on the p2p forum suggesting irr of 70% on a broad portfolio.
Oh yes, I've also been buying VOD. Not a bad yield and it's so out of fashion, but I have a sneaky feeling it's growth potential is being under valued, and for me, it's at least averaged me down LOL I Mercantile have been building a position.
Hi Devon, I hope all is well?
Thanks for your remarks. Interesting to hear that your REA prefs have paid their coupon. I wonder if that is the same coupon that NCYF remarked had been missed (at the time obviously)? If so, it would be a bit of a boost for next year's figures at least and might explain NCYF's readiness to dip into the reserve (i.e. if they believed the REA coupon was just delayed).
Your mention of Volta made me smile since, yes, it is one on my radar! In fact, I think I posted on the VTA board to see if there was anyone out there. Without unduly clogging up this thread, I do find it interesting because even currently the yield is 6.7% or more. But I need to see how they are going to grow it from there. Is it just by refinancing and releasing a bit of margin, or are there more and more opportunities for them to build on? Just like you, it's on my radar for as and when the market is in a panic about something! I have noticed it is creeping up from EUR 6 to more like 6.30. Ideally I would refer it at more like 5.50 to give that degree of protection and a better yield! Not sure how/when it would get there.
Meanwhile, PEY has stellar NAV performance and VSL knocks out the divis!
Stay well.
Guitarsolo
Hi, some little good news, REA potentially has turned a corner, they've paid a coupon on their Pref's, but not yet "caught up" on the outstanding. As far as I remember the sterling bonds haven't missed any payments. I bought some Pref's mid-80's and think they are 96 today. When, and if, they do catch up then there's a nice chunk of accumulated cash. I have a couple of payments on my ledger from Matalan, the last being early August. The refinancing issue remains constant, there almost a regular flow refinancing at a lower margin, so it is a bit more challenging, but he's in the right place with short dated. My historical bond portfolio is still yielding @ 9.6% and has a much higher yield to maturity. Is that an unknown? What the yet un-redeemed stocks will deliver at maturity? There's still higher yield around and there's sellers of it from time to time. You just have to work a bit harder. So I remain a holder, and I'm accumulating on a monthly basis. I've had a bond yield in the last few day c10% return ( coupon and capital) over bit more than 12 months. Now I face the challenge of where to go? I still happy to add RAV's equity and debt, there's a bioheat unlisted bond I like at 8% and New Day, which I think is already in NCYF portfolio. I've also been buying BPCR.L - 7% yield and I'm up a bit in capital terms. The debt market has a larger number of instruments than equity markets, so I doubt he's not got option. As we share VSL, PEY (and this) in our portfolio's portfolio, have you ever look over VOLTA FINANCE VTA.L it's one of those that I have on my list for "panics" and never quite get around to buying when there is one. In risk terms, I prefer BPCR, but Volta has some merits...and it gets cheap on occasion.
Have you ever looked at the "ethical debt market"? No liquidity, but the likes of Triodos, Abundanc and Ethex sometimes offer high yield risk instruments. I've picked stuff up, and you can for as little as £50 investments!, with yields ranging from 6-10%, so far no defaults. It appears Kenyan woman farmers are often more prudent that CEO's/CFO's of multinationals. No surprise there LOL
Hi Devon,
Well, having had a brief read-through (anything more is beyond my knowledge level here!) it doesn't read too well. However, the lack of share price movement perhaps suggest the institutional investors think it is par for the course.
But EPS came in at 4.18p down from 4.59p the year before. That leaves the dividend uncovered (at 4.47p) and means that they had to dip into the reserve account for 0.29pps. Fortunately, that reserve account built up since 2007 was very healthy at 4.15pps (so is 3.86pps afterwards - still 86% of a full year dividend). Thank goodness it was there is all I can think! But it is still healthy at 86% of a full year dividend, better that HFEL for example which has a reserve fund of about 55%. What's a reserve fund for if not times like these?
The drop in EPS is being blamed on a couple of missed coupons/dividends. This from the report:
"The decrease in earnings happened as a result of a few missed coupons/dividends such as Matalan Finance and Rea Holdings (which may be recouped later) and because the environment for refinancing at cheaper levels was favourable which meant the number of bonds that were redeemed early ('called') was greater than we anticipated and finding replacement bonds with the same level of payouts is getting harder."
I guess if they are recouped then we'll see a bumper year in the future. However, I suspect they won't so it is probably best to expect that to be a permanent hit.
So much depends really on whether in the long term they can replace the called bonds with something that pays the same. It might be a busy year on that front if companies do try and refinance now ahead of presumed inflation/ higher rates. It's hard for Franco et al because you can't really have your money sat there not invested/ earning something because you think higher rates/inflation are coming....but when?! I guess that's why they're keeping durations short where possible.
I'll probably continue to hold on the basis that the reserve fund can prop up the dividend for quite a while until the world rights itself (we hope!). Certainly there is still no money in gilts so on the debt front it's got to be corporate bonds.
Anyone else have any views?
Guitarsolo - ("Why worry?" by Dire Straits comes on as I finish this note!)
Hope you are well Mr Solo, looking forward to your comments on the report! Like Franco I've recently bought some RAVP, 2 Sisters and REA Pref's. I also added Matalan on it's low point. I've held Bracken Mido for a while.
I've made a note he's holding Downing Renewables & Infrastructure. I may have a look at that again on any market weakness. I've got cash sitting in a Downing unlisted product at the moment. (5% yield before it was redeemed early) which I might use.
Like you, I had some notes on soi's high yielders. Like the Board, I expected them to be able to find high yielders to replace the maturing issues, but never expected early call/redemption to be so high and it replaced so easily with lower rates. I may have a look at ENQ1 again, chance that the maturity will require a higher coupon, another couple of %
For the moment, I carry on accumulating NCFY on a monthly basis (alongside INXG)
And I was just about to run a quiz for predictions having nabbed 1.47p for myself! It wouldn't have taken a genius to guess that...
More important will be what the EPS came in at and whether it has grown from last year (4.58p I recall off the top of my head). It would be good to build a reasonable gap between the EPS and dividend to allow for more than 0.01p per annum increases.
Bravo Franco indeed (in these times).....but let's face it, he's done it to be able to say he has "always increased the dividend every year"!
But I'm not moaning......!
Bingo! 1.47p. Bravo Franco!