RE: DIVIDEND28 Feb '22
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