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Damofarl,
"Always happy for anyone getting a multibagger! Albeit, I do think a reduction/temporary hiatus on the dividend front may extend your timeline!"
I'm under no illusion that this divi will be maintained for the next 5 consecutive years, and I'm starting from a position somewhat underwater. I do share your optimism that gas will rise in the long term.
Damofarl,
I forgot to say thanks for your kind words. Thanks!
On a separate note you said
"Further to my post below, whilst DEC hark on about 50 years of production, I see more like 15 years of profitable production,"
I would happily take 5 years of divis at this level which would make this a multibagger from here!
If this current low gas price environment continues for any significant length of time, and there are no signs that anything will change soon, I would favour avoiding any unnecessary delay to cutting the divi once it becomes greater than available FCF, after debt/interest payments.
IMO a divi cut has already been priced into the SP. We are in a period of depressed gas price/reduced profit and it is testament to DEC's excellent business model that there is almost zero chance of them defaulting on debt during these testing times. A policy of paying out ~100% FCF (after debt/interest) in divis is not usual or sensible, except maybe in the very short term when it is obvious that a recovery to higher profit is imminent. Right now I don't see that.
I think it's looking a bit shaky.
1H23 free cash flow was $80m after all debt/interest paid. We don't know 2H23 FCF yet but let's say it increases to $88m then that's $168m for the year, which is roughly equal to the dividend, so dividend = 100% FCF
I don't think the average realised FY24 gas price will be better than FY23. I expect it to be less. DEC have sold producing assets in FY23 and there will be a production decline, so on that basis I think the current divi, if continued through FY24 may well exceed FCF.
I think DEC will need to make some significant acquisitions pretty sharpish to increase FCF and fund the shortfall, otherwise it's hard to see where the cash will come from to pay the divi at this level.
I'm not sure how % divi yield is relevant to DEC's ability to sustain the divi. It matters not whether the yield is 1% or 50% of the SP. Total cost of paying the divi + debt/interest repayments measured against FCF are the numbers that matter.
Of course, didn't twig
Reading this from UK govt site I'd assume it would not because it says "while supporting UK companies" ?
"At Spring Budget 2024, the government announced the introduction of the UK ISA. The new £5,000 allowance, in addition to the existing ISA allowance, will provide a new tax-free savings opportunity for people to invest in the UK, while supporting UK companies."
You can have UK or foreign shares in UK ISAs so long as your platform allows it. I used to have Amazon in mine. You cannot hold foreign currency in UK ISAs so the divis just get converted from $ to £ on receipt.
"All very interesting I’m sure but completely irrelevant to this board"
Are you aware that DEC have both a US and a UK listing? Do you understand that the UK listing might be holding back the SP and it might increase if they delisted from London?
Difference in valuations between London and NY
https://www.standard.co.uk/business/britain-s-biggest-companies-would-be-worth-ps460-billion-more-if-they-listed-in-new-york-ftse-100-nasdaq-s-p-500-dow-jones-b1074084.html
"How much does it cost companies to be quoted in the UK?
Alan Miller, CIO of SCM Direct.com
For our analysis, we looked at the FTSE 100 and compared most stocks in the various sectors against comparable stocks in the US and Europe. For example, in the UK the largest sector is ‘integrated oil & gas’ made up by BP and Shell. These titans account for more than 13% of the FTSE 100 and their average Price to Earnings Ratio (P/E) is a lowly 6.5x. This compares to a multiple 28% higher in the US with Exxon Mobil and Chevron standing on 11.5x and 11.6x of their earnings, respectively.
Similarly, UK banks which account for 10% of the FTSE 100 are valued on 5.8x earnings but in the US (even after the demise of SVB and Signature) their banks are typically valued 23% higher. Many of the sectors which the US rated much more highly than the UK were found to be the ‘bad’ poor ESG sectors e.g., Metals & Mining (58% more in the US), Tobacco (44% more in the US), Construction materials (40% more in the US), oil & gas (28% more in the US).
It could be that part of these differences is down to ESG investing being more prevalent in Europe than the US. According to a report by the United Nations Environment Programme Finance Initiative, Europe accounts for 60% of global ESG assets, while the US accounts for 26%."
Interesting article about the dwindling number of companies listed in London.
https://www.standard.co.uk/business/london-stock-exchange-crisis-shares-ftse-100-firms-business-iwg-spirent-tui-flutter-arm-b1143873.html
IMO DEC should join those who've left and de-list here, would do the SP no harm!
Well said Jim
Clearly there are many posting here who should not be investing in individual companies and should only be investing in ETFs or fully managed funds as they're incapable of understanding anything complicated.
In term of how DEC’s hedging is treated in the accounts....well I never...
Without positive news I see SEPL back in the 130's again in a week or so. I may sell something elsewhere to top up if/when it happens. As always the dilemma is what to sell, the appreciating winners or the depreciating losers? Ultimately I think the Exxon deal will go through and this will hit £2+ very soon after.
Jarvaman
This offer is intended for II's who own most of DEC and who have an interest in ensuring the divi is sustainable, short term pain, long term gain. Give up some shares instead of taking a divi of similar value. I think it's obvious that Rusty consulted them and got them on board with this before it was announced.
If you are feeling charitable you can join them and tender some shares. He's offering PI's the same opportunity should they wish to participate
It's not nonsense, it's just that most here don't seem to understand what it's about. I appear to be in the minority.
Fair enough Trek, but surprised you didn't buy them back earlier in the week. I got 7250 at £137.5 on Monday.
You've got a point about results though. CMCL dropped from £8 to £6 on a profit warning on Monday but are now back up to £7.85
Another of mine, GSL dropped about 8% this week after announcing they WOULD hit targets, but have since recovered.
Maybe I'll give that a go...
I'm almost tempted to tender 100 shares just to see the associated divi not arrive and take the ~£50 hit on 28 March, then no one can argue any more.
There's $42m being paid out, take your divi OR sell your shares, the choice is yours!
Maybe GG was right about some of the posters here....
Just checked,
Divi paid on 28 March, anticipated share purchase 27 March. So those who believe they'll be paid twice will be disappointed on 28 March.
"Following the announcement on 15 November 2023 of the interim dividend for the three-month period ended 30 September 2023 (the "Third Quarter Dividend"), the Company is offering shareholders with an opportunity to elect how they will receive the return of capital of approximately US$42 million, in aggregate (the "Return of Capital"). The Company will return the same amount of the previously declared Third Quarter Dividend, but shareholders will be offered the optionality as to how they receive that payment."
Question - when is $42m not $42m?
Answer - when some people ignore what the RNS states and think it's more!