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Meoryou - I am always suspicious of any article that emphasises EBITDA as a key metric especially with highly Capital intensive and geared industries like oil and gas. I really don’t understand the relevance of a metric that doesn’t take account interest, tax and CAPEX in explaining the value of a company.

In this I share the late Charlie Munger’s view that whenever you see the word EBITDA, cross it out and replacing it with the words “bulls—-t earnings”

A_S. One of the better contributions to this bb. I fully concur with your sound reasoning and approach to ‘investing’.

‘Same as every year looking back , 245 to dividend , 215-220 after”

Isn’t that great. With a 15p dividend 245 should fall to ca 230 ex dividend all things being equal.So if it falls further to 215-220 you can reinvest the dividend with a ca 10-15p discount. I like it.

But wel all see things differently.

Impressive IMHO. Focussed and clear strategy which they seem to be delivering. You can be sure of Shell.

Jester. The problem on defining dividend cover meaningful at the moment is the change from IFRS4 to IFRS17 which changes how revenues are recognised, and hence annual earnings which define that cover. This means that earnings reported have fallen significantly on the change of accounting standard, and have not yet equilibrated. But in reality nothing has really changed in the business performance. Some of the earnings previously reported under IFRS4 are now rolled up in an entry called “store of future profits”. So to come up with a useful figure for dividend cover you need to take this into account IMHO. Any accountants out there will be able to explain it better, but the “books” of insurance companies are unique and complex.

My view is that the dividend cover is not an issue.

As someone who was personally connected with Shell for 30 years in the past, I don’t see Shell taking over BP.

I say this because She’ll as never been an acquisitive company -yes, they bought out British Gas in 2016, but that was to get their hands on BG’s oil and gas assets, especially their reserves. And Shell wants to concentrate on upstream businesses divesting from their less profitable refineries and retail sites, so I don’t think they would want to have BP’s refineries or retail businesses - or the renewables for that matter. And Shell already the largest lubricants businesses of the oil companies so I don’t expect them to be that interested in the Castrol business. As such, I suspect only their oil/gas reserves would be appealing.

But, of course , I may be wrong and out of date about the Shell I knew and now observe, so we shall see.

My approach is not to determine a period in which to invest, but to buy when I believe the SP is below what I think the company is intrinsically worth. And what I think it is intrinsically worth -at a 10% long term total yield I want to get - is about 215p ex div. So the maximum price I would want to pay for a share cum final div is about 230p, but of course the lower the better. The history of LGEN tells me this sort of opportunity will almost certainly present itself some time in the future, so there will be an opportunity to buy more should I wish to do so.

But each to their own - and we all need a little bit of good fortune.

Thanks for the review Meconopsis. I remain hopeful but I’m not excited by the results and the market seems to concur.

And as NN has pointed out, the actual dividend pot (DPS x number of shares) will be less in future as, even though the DPS will increase by 2%pa, their will be 3.5% fewer shares in issue if the buy-backs are cancelled.

Nevertheless I hold, as, in my view, the risk adjusted yield still beats those of 10yr gilts by a considerable margin.

Unfortunately when your income gets to £100,000pa you lose your personal allowance by £1 for every £2 of income above that amount. So the rate of IT will increase to 60% between £100,000 and £125,000 before falling back to 45%. Where unadulterated madness!

WHO - “Even though a safe and cost-effective vaccine is available, in 2023, there were an estimated 107 500 measles deaths globally, mostly among unvaccinated or under vaccinated children under the age of 5 years.” And death is not the only consequence.

Perhaps it is this alarming rhetoric why the US is withdrawing from the WHO where 1 to 3 in 1000 US citizens who contract the sec die from the disease. —— protect us from the ignorent.

BR:

This is what LGEN said in June:

‘’The Board intends to return more to shareholders over 2024-27[ref 5], through a combination of dividends and buybacks, with 5% DPS growth to FY24 and a first share buyback of £200m in 2024, followed by 2% DPS growth per annum out to FY27 and further similar buybacks[ref 6]

[ref 5] Compared to returns that would result from maintaining the current 5% per annum dividend growth rate over this period

[ref 6] All capital returns will be subject to the market environment, our views on solvency buffers, and opportunities for investment in the business, including Institutional “

They only quantified the one £200m buyback but suggested that the future returns to SHs could result in increases (of dividends plus buybacks) better than 5%pa. Indeed the current cash generating metrics are looking promising to allow for these greater increases.

It does seem strange to me that Mr Market reacted so poorly to the June Capital Event. Seems he didn’t believe LGEN’s vision.

Hi Getafgrip, Yeah it has been a long time.

Yes I did ok in my speculative punt in Nvidia but I sold as I couldn’t get my head around the valuation and I don’t have enough understanding of the business to be a long term holder. But clearly a brilliant CEO and a quality business but itbadds to a scary world given the unfolding political nightmare.

Re Bayesian. I don’t do conspiracies, but the whole saga is both tragic and freakish so I can see the reason behind the speculation. I hope the various investigations provide some answers, but I am not holding my breath.

Regarding the two oilers, I have held Shell since 1980 and have an intimate knowledge of the business. But it is not my favourite investment now as it requires too much capital for my liking and is too cyclical. As for its wanting to buy BP, I can see that they may want to get their hands on the oil and gas reserves but as for the rest of the business………. I could be wrong, but I do not see a takeover happening. I don’t mind being proven wrong.

All the best.

BR: yes a final FY24 divi of 14.63x1.05=15.36p, making it a total of 21.36p for the full accounting year 2024.

And, as you state, the lower 2% divi growth rate next year is to de made up - a t least -with buybacks. So the total divi next year will be 21.36x1.02=21.78p. At a 5% growth it would have been 21.35x1.05=22.49p so the buyback per share will be at least 22.49-21.78=0.71p all according to my understanding of what they said in June.

Indeed - all subject to confirmation or otherwise in March.

Should anyone be new to investing in insurance companies, and/or would like to know more about what makes them a unique investment, the attached could be a good place to start.

https://pictureperfectportfolios.com/why-warren-buffett-loves-insurance-companies-an-investigation/

DN - there was a 4 for 1 share split in 1999. Without it the SP would be 2.4x4 =9.6.

But yes, insurance companies are the ultimate income companies who pay out most of their earnings as dividends or share buybacks because they cannot invest the earnings ( or the “float”) internally any better than we, the shareholders, can. Buffett explains all in his many deliberations on the subject. Buffett made his money investing his insurance company’s “float” extraordinarily well - most insurance companies are not quite so good at it - so they give the cash back to their owners.

Now looks like the Bayesian will be raised sometime April/May.

https://www.youtube.com/watch?v=OlvIL5j6Wfw

“Buybacks would keep the cash stays in the business”

That is not the case if the bought back shares are cancelled to reduce the number of shares is issue. This is mostly what is done and was the case with the recent £200m buy-back.

“Just to add* for 2 x Final dividends & 1 x Interim dividend over 16 months”

The BoD said in June 2024:

“ The Board intends to return more to shareholders over 2024-27[5], through a combination of dividends and buybacks, with 5% DPS growth to FY24 and a first share buyback of £200m in 2024, followed by 2% DPS growth per annum out to FY27 and further similar buybacks”

FY 24 dividend will be paid in June this year so this dividend, as above, should increase by 5% according to my understanding.

So the calculation would be, if my interpretation is correct, 14.63 x 1.05x1.02 x 2 plus 6x1.02 which equals 37.46p

Every little counts according to Tesco.

L7 - that is right. If a company spends the same amount on dividends or share buybacks, and the dividends are reinvested at the same price as the shares bought back, the long term effect on future earnings is the same. Costs apart, both allow you to increase your ownership of the company. The one because you own more shares in the company, and the other because, even though you own the same number of shares, there are fewer in circulation. Owning a greater percentage of the company means you will have a right to a greater percentage of future earnings.

But there are tax implications - share buybacks are not good anymore (RR increasing the CGT by 80%) for basic rate taxpayers, but in principle still good for higher rate tax payers ( where the increase in CGT is less). And dividends give you cash in hand - buybacks should eventually increase the SP, but that I’d not guaranteed over the short term - or for that matter ever.

When comparing the SP with the value in 1979, I think you need to take into account the two LGEN share splits in the nineties (together 10 new shares for 1 old share). So a sp, of say £10 in 1979 should be rebased to £1 if you want to make meaningful sp growth calculations.