The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Eccles, I think your mate Warren is having you on. Berkshire Hathaway has been sitting on a big cash (or equivalents) pile for a while now, with US stocks being expensive and cash earning 5%.
The one drawback I see is that the dividend has continued rising by just 3% a year, despite inflation being much higher over the last 3 years. I suspect that will continue if we have more high inflation in future. That's why I recently reduced my holding by 1/3, though I must admit I'm thinking of buying it back again (at a slightly lower price), as I'm having difficulty finding anything else I want to buy at the moment, especially with most other shares prices having gone up.
I would assume that the 0.69 dividend cover (if it's correct) is based on statutory earnings. But those are based on accounting rules that don't necessarily do a good job of estimating profitability, especially for some sorts of companies. I believe LGEN's statutory earnings were significantly reduced last year because of a fall in asset values. But that can just be the result of market ups and downs that don't affect the company's ability to pay dividends.
To clarify, the columns are:
Year
Dividend (amount in pence)
Annual % (% increase from the previous year)
Total % (total % increase from that year up to 2024)
Annualized (annualized % increase from that year up to 2024)
I note that dividends have grown about 5% per year in recent years, but the rate of growth has been much higher in the past. It would be interesting to compare with the CPI (or RPI) increase over this period, but I haven't got those figures to hand. I'll have a look for them if I have time. I think we can safely say that the dividend has fallen behind inflation in the last 3 years (with inflation being very high). My main concern is whether it can keep up with inflation if we are going to into a period of significantly higher inflation than pre-Covid.
One thing that's encouraging is that the dividend did very well in the aftermath of the Great Financial Crisis of 2009. Will it do well if we have another big crisis?
I thought it would be interesting to look at LGEN's dividend history, so I did a bit of analysis in Excel. The basic dividend figures are from dividendmax.com, and they go back to 2006. I'm not sure what the table data will look like when it's pasted here as text, so I'll comment on it in a separate post.
Year Dividend Annual % Total % Annualized
2024 20.34 5.01% 0.00% N/A
2023 19.37 4.99% 5.01% 5.01%
2022 18.45 5.01% 10.24% 5.00%
2021 17.57 0.00% 15.77% 5.00%
2020 17.57 7.00% 15.77% 3.73%
2019 16.42 6.97% 23.87% 4.37%
2018 15.35 6.97% 32.51% 4.80%
2017 14.35 7.09% 41.74% 5.11%
2016 13.4 19.11% 51.79% 5.36%
2015 11.25 20.97% 80.80% 6.80%
2014 9.3 21.57% 118.71% 8.14%
2013 7.65 61.05% 165.88% 9.30%
2011 4.75 23.70% 328.21% 11.84%
2009 3.84 -5.42% 429.69% 11.76%
2008 4.06 -31.99% 400.99% 10.60%
2007 5.97 7.57% 240.70% 7.48%
2006 5.55 N/A 266.49% 7.48%
Well, I wasn't going to buy any more BSIF, as I was already overweight renewables including a good-sized holding of BSIF. But BSIF stood out like a sore thumb today as my only holding in the red for the day. The price has just got silly, at 97.5p. That's a discount of 28% to latest NAV, and a forward yield of 9% (probably still 2x covered). Also, gas prices (which have probably contributed to the falling share price) have been creeping back up, though that could easily change again. I can't help feeling that the reason BSIF has been particularly singled out is because some platforms have been warning potential buyers about it or even blocking them from buying it altogether! (See https://citywire.com/investment-trust-insider/news/aj-bell-blunders-deepen-row-over-fair-value-restrictions-on-trusts/a2440235)
Yes, GSEO seems incredibly cheap: 8% yield with under 60% of capital deployed and virtually no leverage. And if I understood correctly, it claims that all its contracts are fully inflation linked. I noticed that the contracts for its US storage are only 3 years. We just have to assume that there's going to be continued demand for those. And I generally prefer funds with a proven track record. We've seen other new funds turn out to be badly managed. But I'm optimistic enough about this to risk a 3% investment.
I was always rather doubtful about battery storage funds, fortunately as it turned out. I did get into GSF late last year, when it was already at a 40% discount, but later changed my mind, getting out with a modest profit. I think the battery funds are at too much risk of the grid operators changing the rules on them. At least the generating funds like UKW have much of their income covered by subsidies and guaranteed prices. It would be pretty extreme for the government to renege on those. I'm more concerned about their market revenues, as it's the government that sets the rules of the market, and we know those are going to be changed.
Because people don't seem to realise that higher inflation is actually a good reason to buy funds like UKW which have good inflation protection! They'd rather own bonds that pay a very low real (inflation-adjusted) yield.
I've only just discovered GSEO. Strange I haven't come across it before, because I've been looking at a lot of different renewables funds over the last 2 years or so. I currently hold UKW, BSIF and AERI. I wasn't going to buy any more renewables as they already make up over a quarter of my investments. But I have some cash to invest, after taking some profits (not in renewables, needless to say!), and I'm having difficulty finding any thing else I like. I was waiting for a bit of a market pullback. But GSEO looks cheap (even after today's price bump), so I'm thinking of going for it. There's also some diversification benefit, relative to my other renewables.
Good luck!
Nice to see CSN holding today when the rest of the market is down. Relatively speaking that's an increase! I decided to pull the trigger and sell the shares I bought in early December, for a small profit. I got almost 280p. As I wanted to trim my holding anyway, I thought I'd raise some cash now, in case today's drop is the start of a correction. I think we're due for at least a small correction, even if the general trend upwards continues. I still have 5-6% of my portfolio in CSN.
Well, I won't mind too much if the share price just retraces to where it was before, so we get the dividend with no fall in share price overall!
Since I was thinking of reducing my holding a bit, I might sell some just before ex-div day.
I'm tempted by BBGI, as I really like the visibility of its cash flows. But I have difficulty getting past the fact that its inflation linkage is only 0.5. As a recent retiree, I fear inflation!
By the way, don't overlook the disclaimer at the top of the Kepler article: "This is a non-independent marketing communication commissioned by BBGI Global Infrastructure."
Wow! As soon as I posted that it jumped to 275p. That's probably a buy price and it'll soon snap back to the sell price. Still, it's a good sign.
Nice to see a modest rise in share price. It touched 270p today, the first time I've seen that price for a while. I'm still slightly underwater, not counting dividends. I don't usually care that much about the share price, as I'm holding for the dividends, but I thought I might sell a few shares if it goes higher, as I overdid it a bit, at 8% of my portfolio.
I was puzzled by the idea of BSIF falling an FCA "fair value assessment" (thanks for posting, DaveysShares). So I did some googling and found this:
https://www.lemonfool.co.uk/viewtopic.php?f=54&t=42922
It looks like it can be safely ignored.
@ToS1963
I think you're missing the fact that after the buyback the company's assets are down by the amount they spent on the shares. That will tend to reduce the share price, and may cancel out the benefit of the increased EPS. I think that's why zac0_4 said that a buyback is a neutral transaction.
However, from my point of view, as a long term investor, the potential benefit of a buyback is not that it could increase the share price in the short term, but that it could increase the long term returns, as measured by long term dividend paying potential. If the shares are being bought back at a price below fair value (fair in terms of long term dividend paying potential), then the buyback is "accretive", meaning that it increases the fair value of the shares. However, even then I wouldn't expect it to increase the market price of the shares in the short term, since Mr Market thinks that the current price is the fair value, so he doesn't agree that the buyback is accretive.
Even if the buyback is accretive, there's a case for saying that the company should instead pay out the same money as an extra dividend, and let shareholders decide for themselves whether to reinvest the dividend by buying more shares in the company. (One counter-argument is that the buyback may be more tax-efficient for shareholders, though that won't be relevant to those of us with our shares in an ISA or SIPP.)