Member Info for tomglan

zebbo if you google 'direct line dividend history' it's the first link.
https://www.directlinegroup.co.uk/en/investors/shareholder-centre/dividends.html

I'll take Direct Line hovering around the £2.90 level as well as a 22p div in the bank versus losing 15% on Tesla shares in two days. It won't take long for moves like that to scare off the speculators in tech. In contrast to the doom and gloom I am quite bullish on the UK over the medium term, my average earnings yield on UK holdings is over 13% and dividend yield is 8% with little debt to speak of as well. Even if there is little to no growth for the foreseeable in the UK it's hard to not get a reasonable return when that is the value on offer. GLA

From the DLG report: "The ex-dividend date will be 13 August 2020"
You need to own the shares prior to the ex-dividend date in order to receive the payment. Any shares sold today will be entitled to the payment on 4th Sept.

Libero bear in mind that 19% of the rise in solvency ratio to 192% was due to £260m of subordinated debt which was announced on May 29th. Had it not been for the debt raise we would be sitting on a solvency ratio of 173%. Page 21 of the H1 results presentation has a good walk-through. As an aside, I got the impression from the finance director that the company won't be returning to the 160% solvency ratio levels until the pandemic is fully in the rear-view mirror.

Libero, I agree with your point below regarding valuation and found your earlier insights into the business helpful. For me the analysis is rather simple, I believe DLG is a net beneficiary to the changes forced upon us by the pandemic and the share price should recover similarly to that of our competitor Admiral. I believe we should be trading at the same levels as pre-pandemic (mid-Feb) which was 350p, I would then say it could go a bit further due to the discount it trades on even at the 350p level. For example, Admiral is currently trading on a 6%+ dividend yield, however, DLG would still be trading at 9%+ dividend (+ buyback) yield even at 350p! I have included buybacks in the yield calculation as these are another form of shareholder return and could easily be swapped for a special dividend. Both companies appear to be able to cover current shareholder payouts from cash flows so it is simply the market viewing Admirals earnings as more 'valuable' than DLGs. I understand the buyback and dividends are on hold currently but as long as the cash flow engine isn't impaired then these should resume relatively soon.

My core holding has an average price of £2.88 and I've recently opened a CFD position at an average of £2.71 which I intend to hold until results (although very tempting to sell today!). Look forward to your thoughts on the 4th Aug. Cheers

States 28th May ex-div on their website and press release

RetiredCopper, the Disposal RNS stated that the proceeds would be used to reduce debt. I've noticed various shareholders and commentators complaining about IMB having too much debt even though it is less levered than BATS. The cigar business was sold for an 11.8 multiple to EBITDA which is about 8.5% as an earnings percentage. So we've sold a premium business with world-class brands and strong pricing power earning us 8.5% a year (on sale price) in order to pay down some bonds costing us 3.5% a year in a world of 0% interest rates. My only hope is it keeps a few of the 'squeaky wheel' shareholders quiet for a while...

@andsoforth: For 2019 net cash generated from operating activities was £3.2bn and the dividend cost £1.85bn, which leaves £1.35bn for capex, interest payments, and debt reduction. In what way is the dividend not fully covered?

Could you also explain why you think things may be stronger at BATS? As of 2019 BATS had £42bn net debt to £9bn operating cash flow which is a 4.67x multiple whereas IMB had £10.5bn net debt (includes recent cigar sale) to £3.2bn operating cash flow for a lower multiple of 3.28x. Another way of looking at it, if IMB directed all cash flow to debt reduction it would take just over 3 years to pay it off, compared with almost 5 years for BATS. Now I understand BATS has arguably better brands but from a financial perspective IMB looks in better shape as things stand.

Martin, I've been a holder here since the share price was around £30, initially I thought I was getting quite a good deal with a 6% dividend yield haha. The company has said on two separate occasions that there has been no material impact to trading due to the pandemic so in cash flow terms things should be OK. It also appears being stuck at home has increased alcohol sales so I wonder whether there may be a crossover with tobacco as well? Personally my two main concerns are (1) new CEO slashing dividend when he joins in July (2) government deciding on a windfall tax for sin stocks to raise tax revenue i.e tobacco and alcohol. I don't pay much attention to NGP at Imperial, I wish they'd stop throwing money at it and just let the core tobacco business run-down so they can return as much cash to shareholders as possible. I'm hoping the new bloke sees the writing on the wall and makes us nice and easy to gobble up by reducing debt, reducing brands and stopping NGP capex. ATB, Tom

I think the dividend should be paid as investors rely on this income in the same way that employees rely on a pay cheque. Going forward any company that suspended the dividend during this pandemic will have a black mark against them in my book and a discount applied to the price I'd be willing to pay for shares. LGEN passes the test and I've added to my holding earlier in the week. Direct Line fails the test but only because it caved to the regulators, it has the cash available and a strong balance sheet so I'd be willing to forgive that going forward. There are many other companies that have suspended dividends without being coerced by regulators and this may suggest their businesses are not as resilient as others.

It's not as easy as that though as there are an awful lot of companies that couldn't handle a year with no revenue without running into solvency issues, breaching covenants etc. which would result in the equity being worth close to zero whilst the creditors pick at the scraps. The last few weeks were enough to finish off Cath Kidson, Laura Ashley, Debenhams... another 4-12 weeks of lock-down will likely see more added to that list. Having said all that I picked up some LGEN @ 1.75 first thing Monday for the ISA, here's to hoping they can weather the storm!

I'm yet to invest here but want to run through some numbers based on the current share price (as of 2nd April 2020) of the public holdings that SLA own. We have 19.97% of Phoenix which is worth £830m, 26.91% of HDFC AM which is worth £1,300m, 14.73% of HDFC Life which is worth £1,360m as well as 50% of an unlisted Chinese pensions company that contributed £17m to profit in 2019. If we simply add up the totals (based on the current share prices i.e. after the COVID haircut) we arrive at £3,480m. If we subtract the £3,480 from the current market cap of SLA we arrive at a figure of less than £1bn for the existing SLA business, having stripped out the public holdings. The existing SLA business made about £300m in adjusted operating profit in 2019. So if SLA were to sell all the public holdings at the current price we'd be left with a business earning around £300m a year with a market cap of £1,000m - that's a 30% earnings yield! Now I understand asset managers will be under pressure for the foreseeable but that price takes a lot of that into account already. As there's so much else on sale at the moment it may be that I don't end up investing here, the financial statements look a bit of a mess to be honest. If anyone has any thoughts on the above I'd appreciate the feedback. Cheers, Tom

Note: I understand SLA recently sold a chunk of HDFC Life but the overall point still stands.

Interesting article thanks McDoog. I believe assets under management should be £1.2 trillion (not billion), although I bet the last few weeks have knocked a bit off that figure by now! I picked up a few more on Friday @ £1.57 which is essentially the last reported book value of the shares. Buying at book value or less has proven to be a good long-term strategy here so fingers crossed it works out again. Having said that, I believe there is more pain to come as LGEN got sold all the way down to 30p during the 2008/9 financial crisis and this has a similar feel about it. ATB

The £150m buyback equates to 10.8p per share which is 30% more than last years 8.3p special, having said that I would have preferred the cash again this year.

The current policy is to increase dividends in line with business performance from a base level of £2.07. However, we have the new bloke starting in July so there is the potential for changes to be made. H1 results in early May might shed further light as they'll declare the interim dividends.

Thanks for the reply Mike, I actually think we agree on the fundamentals. I usually prefer to receive cash in the form of dividends over buybacks so I can make my own decisions on how to use it (whether that's for more shares or a new car is up for debate). It's my view that in this situation the surplus cash from the asset sale would make more sense as a buyback (or special dividend) than towards debt reduction due to the cost of debt being only 3% or so.

As an aside, do you have any income stocks you are currently looking closely at? For me Direct Line (9% dividend) as well as Jupiter (7% dividend) have caught my eye, especially since both are sitting on net cash. Those dividend yields include specials but these are usually paid every year.

P.s. regarding the 13.6% it should really have been labelled as earnings yield.

ATB Tom

Debt and equity are simply different ways to finance a company. At the moment equity costs the company 10% a year whereas debt costs it around 3% a year. It's like saying you should pay off a 3% fixed-rate mortgage over a 20% APR credit card because mortgage debt is bad.

Not sure I agree that the BoD would get sacked either, buying back shares at £20 yields a return over 13% (£2.72 EPS / £20 SP = 13.6%). This is higher than the 13% hurdle rate for projects with the added benefit of no operational risk. Would you rather 13%+ guaranteed or throw some more money at loss making NGP?

I think we'll have to agree to disagree, however as a shareholder myself I want the board to take the share price into account when making capital allocation decisions. If they could emulate Next PLC with their calculation for equivalent rate of return then all the better (check how Next has done over the last 12 months). Just as a final point, if the dividend yield was 3% and debt was costing us 7% a year then I would totally be with you that debt should be paid down as a priority - but we're just not there yet. ATB

Looking good here, I'm within touching distance of my cost basis now. With BATS hurtling towards £35 this should really be mid-to-late 20s in a rational market, albeit slight discount due to CEO leaving / weaker brands... but you get the idea.

WHM?

Caught me off guard too. From recent RNS "...will now release its 2019 third quarter trading update after markets close on 20 November 2019". So expect it later tonight.