Cqs New C.h.y.f Share Price (NCYF)

From 28th Feb: "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!"

Turned out to be spot on! Not a hard prediction though.

I await Franco's commentary at end August/early Sept (?) to see (i) how much they had to dip into reserves to cover the dividend and (ii) what the outlook is like.

Bottom line is that capital is depreciating and dividend increases are way behind inflation having increased by 0.01pps in each of the last four years. It's all very well saying "we've increased the dividend every year" but when it is by that amount you know if has only been done to be able to make that claim and should therefore be challenged as to its actual benefit to anyone.

Still holding but would like to hear the prognosis from the horse's mouth.

Guitarsolo

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!)