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@buller...
@Krustysmegma is correct that a lower dividend cover pays out more of the earnings. @Krustysmegma is incorrect is adding a % sign to the dividend cover number - it's a ratio, not a %
So, if Barratt made £100m then dividend cover of:
- 2.5 results in a dividend payout of £40m to shareholders
- 2.25 results in a dividend payout of £44.4m to shareholders
- 2.0 results in a dividend payout of £50m to shareholders
- 1.75 results in a dividend payout of £57.1m to shareholders
Barratt have announced a while ago a plan to reduce dividend cover (i.e. increase capital returns to shareholders) from a dividend policy of 2.5 dividend cover in increments of 0.25. Someone here will be able to remember where they were targeting (I seem to remember 1.5, but I might be wrong).
The reason for the policy was that the company was accumulating more capital than it could usefully deploy.
Nice to see you backing all of that with facts @causal ;)
“Why would there be a dividend cut. The company still has the money and this is just rumours and speculation.”
The Board will need to provision for likely compensation, which will reduce distributable profits. That there will be an enforced, industry-wide compensation scheme is near inevitable based FCA rulings and subsequent review.
“I was looking thru an old trading report in persimmons office and it was from 2014 and they made about £380m profit that year and paid a dividend of £1.10. So they are in better profit and will be under paying from that year based on my expectations.”
I welcome other’s views on this, but am not sure if we can read across based on headline profit numbers. In 2014 the company was actively pursuing a policy of returning capital to shareholders and had an extremely strong balance sheet. That balance sheet isn’t as strong now.
I am happy to be wrong on this and pleasantly surprised ;)
@Christofer - if you can't see the funny side of any sudden drop then you've invested more than you can afford to lose and - by definition - have over-extended yourself.
If you can't see the funny side then investing in individual shares ain't for you.
*DUH*
It must be said that it’s a stinking trading update and, in a better market, would have surely been worth 10% on the share price.
Ho hum. Let’s all feel smug when “the others” find out about PHNX.
AbjectPerformer - you appear to be doing really well ;)
A couple of important things about your workplace pension:
- the default fund is seldom very good and usually over cautious - many are over-focused on the UK (in a bad way)
- the range of funds often focuses on lifestyling - switching from stocks to bonds as you approach retirement on the assumption that you’ll buy an annuity.
It’s important to remember that you can part transfer out your workplace pension into a SIPP and remain in the workplace pension
When I worked at L&G they didn’t make their tech fund available within the staff pension scheme. So every year, I’d transfer out most of the previous year’s contributions into HL and invest in the fund there.
AbjectPerformer - timescale is important I'm mid-50s and will be taking income from my SIPP next year. I have no other pension except the state pension.
The following are my views and not advice. DYOR etc...
My approach is 70% in dividend paying shares, which currently generate around 180% of my target income. That allows for two things:
- a couple of the companies messing up and not paying anything for a year or two
- ongoing dividend reinvestment to cover inflationary increases in my income.
The remaining 30% of my money is in growth funds. In principle, these should grow faster than value of the dividend shares over time and I'll rebalance down to 70:30 once the growth funds exceed 40%. That will provide my "pay rises".
AND/BUT - I'm at the point where I need a degree of income certainty. You're not. So, whilst I wish I'd "discovered" dividend shares earlier, at your age you can afford to take more risk and focus much more on growth funds / shares.
At this point I'd focus on growth funds - like the ones that Zac04 has previously mentioned - over dividend shares. As a principle, the great thing about dividend shares is that you're living off natural yield and not selling down capital - but at the expense of long term growth.
If I were you then I'd allocate 20-30% of my investments to buying dividend shares, but build the money up in a money market account and wait for to buy for when there is a stock market shock.
"Pick your own stocks if you can to avoid costs and fill up your Isa before a sipp. ISA more flexible."
There's truth in here with a caveat.
In retirement, money in an ISA is generally "better" than money in a pension because you don't get taxed on income from an ISA - whereas money from a pension is taxed at your marginal rate when it's paid to you.
BUT/AND - if you get a workplace pension then you get employer contributions - often matching ones up to a level. And old employer gave 10% base contributions and matched contributions up to 25%. That's free money.
Also, if you're a higher rate tax payer then there's tax asymmetry with pensions - you get tax relief at 40% when you pay into the pension and "only" taxed at (probably) 20% on the way out.
So, you're generally best maxing out contributions into a pension up to your employer's contribution match.
If you're a higher rate tax payer then paying into the pension usually wins over an ISA if you expect to be paying only basic rate tax in "retirement".
And then maxing out your ISA.
“Stevebt thank you just thought that it would have a knock on effect ?”
The most likely outcome is positive for UK house builders, but bad for the miners.
Less demand for steel and concrete = lower commodity prices = bad for miners and good for companies that use concrete and steel.
“Evergreen is Taiwan's shipping company.”
I’d just presumed that denby is a Streisand fan…
@zac - completely correct, but excluding dividend reinvestment…
@FangKat - if you read the last annual report then this is both clearly disclosed as a risk and also flagged as something they can’t quantify until there’s a ruling.
In which case, what do they say in a trading statement other than “if you think we’ve got it bad then don’t be a Lloyds shareholder…”?
@Trouts - I agree that this isn’t PPI.
But your view isn’t the one taken by the ombudsman. The two rulings (and supporting arguments) likely set a template for how this gets imposed by the regulator.
"..tempted to top up..."
This is an interesting conundrum.
The markets have taken fright to there being a regulatory review based on two ombudsmen decisions against lenders. CBG are a big player in the space, but not the biggest and the ombudsman decisions were actually against Lloyds and Barclays. The ombudsman hasn't yet upheld a related decision against CBG.
The ombudsman finds against the lenders because they failed to disclose that they were paying discretionary commission - and the size of that commission.
The redress in both cases was to repay the consumer the difference between the rate paid and the lowest rate available to the dealer (typically around a 2% difference) plus 8% simple interest per year.
In both cases the ombudsman finds that it would not be fair to either have to repay the loan to the consumer in its entirety or to charge a zero interest rate.
The UK market for car loans is around £80bn (with Lloyds, Barclays and Santander having most of the market). CBG motor loan book at the end of July 2021 (the latest date I can find) was £2.1bn (both these numbers from Google Bard). Discretionary commission was banned in January 2021.
So, a worst case on the end 2021 loan book of £40m(ish) and this spans multiple years. Not not all of the loans will have been at discretionary rates and there's question of whether you'd need paperwork to claim.
I'd take a worst case guess at £120-140m worst case?
Anyone have a view?
Well…
There’s a correction on Alliance News that CBG were NOT due to release a trading update today.
RBC have cut their price target to 925 from 1,075 (outperform).
And meanwhile, here we are at 550!!!!
"Overall company insolvencies in December 2023 were 2% higher when compared to December 2022."
"In December 2023, there were 6,584 individual insolvencies, which was 20% lower than in December 2022."
https://www.thegazette.co.uk/insolvency/content/104217
“ old repayment book out. 35k mortgage. Payment £546.30”
Tell kids that today and they won’t believe you!!!!
Your and my mortgages were probably during the period of a proper house price crash and substantial negative equity.
Stt1 - it's the macro stuff that's the worry - I agree. But it's a reason to exit or go short of the whole market - rather than being a house builder-specific issue.
Thanks for the reply stt1.
I think you're conflating sector issues (should I be long in house builders) with macro stuff (should I be long in anything other than defence shares and gold).
Government debt is an important worry, but it's mortgage debt that drives the housing market. Mortgage arrears and repossessions were significantly up last year (https://www.ukfinance.org.uk/news-and-insight/press-release/mortgage-arrears-and-possessions-q3-2023#). That pressure will ease as rates go down.
With respect to Home REIT, I disagree that you can compare the distressed sale of an investment trust - who are very specifically invested in homes to rent in the third sector - with house builder sales. Home REIT isn't a house builder.
We certainly have house builders facing issues - as the collapse of Stewart Milne Homes and difficulties at Crest demonstrate. But Stewart Milne Homes has been for sale since December 2022 and none of the trade buyers was interested.
"Agree but the problem is for those whose with 2-5yr fixed rate mortgages, due to re remortgage, the rates are still significantly higher, double what they have been used to. "
And that's what all the mortgage stress test nonsense was about when they took those mortgages.
What has been generally missed in all the noise about mortgages is that a significant minority of mortgage holders haven't yet been touched by the rate rises. If you took out a five year fix 3-4 years ago then you'll have missed the worst of it.
People also miss that people can choose to remortgage onto a lower rate as rates drop - albeit with a penalty.
"Compared to 1990s, nowadays 2 partners take on the mortgage at 5-6x income and use a significant portion of their income on the mortgage. That doesn't leave much headroom is they run low on disposable income. They can't work any more. Previously, it used to be 1 person took on the mortgage at 3-4 x their income, so if needed a partner could look for part time work to make up the shortfall. "
Is that the 1990s when I my mortgage consumed 80% of my take home pay and I was living on toast for 2 years?