The buyback drives up the price. It increases earnings per share, which increases dividend per share.
I don't think they are planning a buyback. They are holding funds until the uncertainty is resolved. If it resolves relatively quickly, having the cash may give them an opportunity to buy equipment / material / land at a bargain price.
In a crisis you conserve your cash. Hurts for those who were counting on that dividend, no doubt. But it is good management long term.
As to the idea that the executives made this decision to improve their bonuses, that's nonsense. They don't have the power. The board of directors will have made the decision.
Personally I'd rather see them make sure the company survives and is in position to go forward and pay dividends for years to come. If that means holding off on a dividend, that's fine. If you can see the future and know how long the company will be shut down and how quickly the housing market will come back, share the knowledge with us. Otherwise, I'm happy to see them stay careful.
Hi, Nige. I'm sure they'll stop completing houses. You might see some outdoor work progress but all finishing work inside will stop.
I still expect a strong recovery but it does depend on how long this takes. There's nothing free in life, it all has to be paid for. The government may "pay for" propping up the economy but we'll pay for it in higher taxes and reduced benefits/services, and that means less money (or devalued money) in bank accounts.
A housing shortage doesn't necessarily equate to house sales, if people simply can't buy them. And government can only do so much. So my hopes for a strong recovery in 2021 are somewhat dependent on how long this lasts and how much it costs, in economic damage and government debt.
So hard to know what will happen.
If this all blows over in 3 months, the first thing many people will want to do is get out and go places. And if people are hurting financially, cheap clothes might be appealing.
Unfortunately I expect it to drag on for a while, in which case it might really hurt badly. We'll see.
"why would psn suspend the divi,they can hold onto their houses and sell it later if the crisis goes quickly"
Just depends on how long this lasts and how much money they lose. That cash is the best guarantor of the company staying in business and returning to profitability quickly and they shouldn't disperse it unless they are very confident they don't need to retain it.
They have to pay salaries and other expenses even when houses aren't being built or sold. They don't know how well the housing market will bounce back, or how quickly. Sales are going to be in the tank for the first half of the year, at least. I expect house sales to be very low the second half of the year because people are scared about what's going to happen to the economy and their jobs in the long term. And Brexit is happening, too.
If this runs its course and we get back to some semblance of normal without losing 1/4 of our jobs in this country, I expect sales to pick up a lot next year, but I expect this year to be largely a disaster for housebuilders. I think that makes it a great time to buy them but not a very good year to expect high dividends from them.
That, of course, is only my opinion and I've been wrong lots of times before.
Hi, Wilfie. The company could go bust if the recession is bad enough that no one can afford to buy new homes. Given the amount of lovely cash the company has, that's very, very unlikely. There will still be a housing shortage, so some people will still be buying homes, even if the economy takes a bad enough hit that house prices drop somewhat.
Since PSN has more cash than some other housebuilders, they are likely to be one of the last survivors. So I'd be amazed if they go bust.
I won't be surprised if they stop paying dividends for a while, if they lose a lot of money. I won't be surprised if it takes a while for the share price to recover. But I'd be very surprised, even in a horrible down-turn, if they go bust. They are in a better position, IMO, than they were before the credit crunch, both in absolute terms and relative to their peers.
What I really expect is that this will run its course over the next few months, by summer the worst will be over and we'll be in a "it's here, we have to live with it" phase, just like we've been with flu, cancer, diabetes, and a bunch of other stuff. It will be bad and more people than we'd like to think about will die, but it will settle down and society will learn to cope with what's left. And then governments will pour massive amounts of money into the economy to get things restarted again.
When that happens, people will still need houses, and I expect the strongest housebuilders to survive, with some of the weakest folding or perhaps being acquired by some of the stronger ones. I'd include PSN among the strongest ones.
That's what I think will happen but I'm an optimist....
The share price right now has nothing to do with whether the company is going bust. It has to do with panic because people don't know how bad this is going to be both in terms of the pandemic and the impact on the economy. Whether that fear is well-grounded or not we don't know, but it really has nothing to do with the strength of the company, it's all fear-driven. If the fears are right the company may still be overpriced, but it's not going bust. If the fears are wrong (which is what I think), the company is significantly underpriced.
If you are a nervous person or can't afford to take a risk don't buy into this market. If you are really nervous you might want to sell while you still can, but there's a very real risk (in my opinion) that if you do so you are selling at a low point and will lose a lot of money. Usually one wants to sell high and buy low, and you'd very possibly be doing the exact opposite if you sell now. But none of us know what the future holds.
I've taken a risk and increased my share holdings in recent days. Clearly missed the bottom of the market and did so too soon but I think I got good value and will benefit. But I have the reserves to ride it out and time to wait, and not everyone does. It's not a market for the faint-hearted.
IMO, of course. Could be wrong, it's happened many times before.
Everyone is going to be losing some money in the next few months, that's pretty clear. PSN has loads of lovely cash to bring them through, they'll be one of the survivors and will likely come back even stronger as a result.
"Now if I could filter by content as well, then all mention of him would disappear from my life ... oh, and wouldn't that be bliss?"
Well, we could all report his posts since as I noted before he breaks posting rules all the time. But maybe it's better for people who think like he does to have some outlet, and this one isn't really doing us much harm. At least, that's my view FWIW.
Let's see. -62% of 9 months is approximately 7% a month. So his chart tells him that 7% a month for 12 more months would be -84%, give or take a little, which would be down 146% from where it was 9 months ago.
So that's like, I don't know, -250p or something like that.
Why stop at 0?
"True, I wonder why Ski dont take out a massive short position"
He's too busy reading his chart and trolling.
Actually, I think he's reading his chart and deciding to take a short position, then coming here to try to talk the share down to get readers here to sell and drive the price lower. That's why he's never here on up days, his chart is telling him it's a buy those days.
"Excuse the ignorant question but how does a company pay a dividend in excess of its profits?"
It pays them out of profits it earned in a prior period and had retained. No sane company will pay out all of its profits every year. They will keep some in reserve, for CapEx, for unexpected expenses, to maintain future dividends, to provisionally reduce debt in future if it isn't needed for some of those other expenses.
Most companies don't want to pay very high dividends one year and none the next, so they'll hold enough in reserve that they can pay something the following year. Eventually, if profit repeatedly falls below the dividend level, dividends will have to be reduced, once reserves are exhausted.
We just got an 8% dividend, with more supposed to come later in the year. That's an incredibly high dividend compared to the rest of the FTSE100. Essentially the market is betting, with the share price, that the dividend is not sustainable and that EVR will have to cut the dividend soon. I won't be surprised if that happens.
But I'm convinced that over the long term / over the life of the economic cycle that EVR is going to be profitable. And Russian mining companies typically pay out a very high percentage of their earnings in dividends. EVR is actually better than most of their peers in that regard, they've been bringing the debt down. Ideally I'd prefer to see it come down a little faster and the div be a little less, but I can live with it.
"If we look at Thomas Cook, we see the shareprice collapsed at roughly the same speed as EVR, plunging -60%."
If we look at Thomas Cook we see that they were actually losing money. EVR has remained profitable even when steel prices were in a down-turn, which to be honest is pretty impressive. Cyclical shares like this often lose money in a down-turn and then make loads in good times.
I don't know if you are actually an investor or just a troll, but if you ever think about actually being an investor, here's a truth that can help you. Share prices don't determine the future of a company. At best, they tell us what investors are guessing is the future of the company, and a lot of investors aren't even deciding based on that, they are guessing as to how they think the share price will move over the next day or week or month.
Here's another truth for you. In some market conditions and with some shares, charts are worthless. This is one of them. This will always be a volatile share because of the nature of the business and the nature of the company. Too many people who own this share don't understand the company or its business or aren't long-term investors, so it bounces like crazy. It always will. Yesterday's price movements are never indicative. You told us ages ago this was headed for below 100 in months, and the next two days it bounced up like crazy. You're here on the downswings with your charts and absent on the upswings.
Companies that are turning a profit do not go to a share price of zero. Never happened. What a moronic statement.
Nor do companies that have asset worth in excess of their debt.
Core value is steady as of right now. Given the current exchange rate, the dividend paid to holders yesterday is 31p / share. It's gone ex-div today. Share price right now is 31.50 lower than yesterday. So core value is down exactly 0.50p. Today's price drop only excites those who don't have a clue.
Could stay blue but the div is a big one to make up, that would be about a 10% daily increase.
Or we could see a huge drop. The whole market is behaving like Evraz these days, bounce and weaving like a drunk kangaroo. Long term, I think this is a winner to hold or I wouldn't have topped up but on any single day what it will do depends on who sneezes or doesn't sneeze in Tehran or Beijing or Washington.
I suspect the markets are happy today that it looks like Sanders isn't going to run away with the Democratic nomination. Biden would be back to business as normal in Washington but a little more leftish than it's been in the past. Sanders would be Corbynism trashing the largest market in the world. Now it looks like a reasonable chance that the Dems will stop him. Investors would rather have him stopped two steps short of the presidency rather than be one step away.
I've been watching it for months. I bought it because I think coronavirus has revealed how exposed companies and manufacturers are to just-in-time delivery of goods and components. I think that means, over time, that companies are going to look to increase manufacturing of critical components locally. That means more factories being built and more demand for Rotork's products.
I also have felt for some time that the financials are very strong and that management knows what they are about. I like the cash the company is holding given what the world is doing right now. Also Hostetler's reorganisation really seems to make a lot of sense and seems to be paying off.
I almost bought at 320 a while back and decided to wait (was doing other things with my cash), but when yesterday gave me an opportunity to get in near 280, I grabbed it.
I had no idea what would happen today. I'd feel like a genius if I weren't kicking myself for not buying more. I had the cash to buy 3x as much as I did, but I got scared by the volatility and decided to sit on more cash.
I'm in for the long term, though. I'd be happy if I'd bought in at today's price, today's results basically confirm all the reasons I bought and give me no reasons to doubt the decision. I'd be happy if I'd bought in at today's price rather than yesterday's, that was just a lucky bonus for me. I think this is a long-term winner.