May 27th, 2011
DII Snapshot service launched
UK's credit rating under threat?
Utilities so boringly predictable
It has been a while since we have been in touch but we have been busy developing a range of new services at our sister-site Dividend Income Investor.com that we think you may be interested to hear more about. The first of these, - DII Snapshots - we are excited to announce the launch of today.
With DII Snapshots you are in the driving seat: you decide which dividend paying company you want us to report on exclusively for you – just like the one we prepared on Severn Trent Plc recently, which you can download here for free.
We are also just adding the finishing touches to our new eBook Guide to Dividend Investing and will be announcing its launch very shortly.
To coincide with the new launch of our new products and services, we are amending our subscription structure at Dividend Income Investor.com.
As many of you are aware, we have been offering subscription discounts to Dividend Income Investor.com exclusively to subscribers of Dividend Alerts since the launch of the website, earlier this year.
However, from the beginning of June, at no extra cost, subscribers of Dividend Income Investor.com will receive two DII Snapshots every month, whilst also being offered our new Guide to Dividend Investing, at half price.
So we just want to let you know that not only can you still benefit from the introductory discounts currently on offer, but we will now be including regular DII Snapshots at no extra cost, as well as 50% off the price of our new eBook, if you decide to purchase it.
Subscribe Now, to benefit from these discounts.
And Of Course our subscription price guarantee stands . . .
Your subscription price is locked from the moment that you subscribe until you cancel – as always, the subscription price you pay now will NOT increase as long as your subscription is active.
Several of the companies we cover at Early Retirement Investor.com have released their results, summaries of which are below, including from:
Multinational retailer Tesco has come up against tough UK trading, but most of its international business remains strong. In the UK, like-for-like sales fell 0.7 per cent in the final quarter and were flat for the whole year.
Tesco’s group sales were up 8.1% to £67.7bn and pre-tax profits was up 12.3% to £3.8bn. Tesco’s operations in Asia and Europe contributed nearly 70% of the group’s profit growth, while its US operations underperformed (again).
Due to the integration of two recently acquired fresh food suppliers and adverse currency movements, Tesco’s US’ Fresh & Easy stores reported a loss of £186m. However, losses are expected to reduce sharply this year.
After seven years and approx £800m investment, and, with fewer than 200 stores, CEO Philip Clarke has not ruled out exiting the US business. I am counting on it, following its turn around. As is its 3% shareholder: Warren Buffett’s Berkshire Hathaway.
The full-year dividend was raised by a healthy 10.8pc to 14.46p, with the final payment of 10.9p being made on July 8. This represents the 27th consecutive year of a rising dividend payout. Tesco shares remains firmly in our Dividend Income Portfolio.
Scottish & Southern Energy
SSE, UK’s second largest electric producer reconfirmed its long-term commitment to above inflation dividend growth (dividend increase of at least RPI+2% over last year), which is precisely what we want to hear at Dividend Income Investor.com.
The group reckons it can achieve these targets while maintaining a dividend cover around its established range. Revenue from new customers and generation projects due to come online this year and next will underpin dividend payouts, said Ian Marchant, chief executive.
In the year to March 31, revenues rose to £28.3bn from £21.6bn and pre-tax profits came in at £2.1, up from £1.6bn. SSE's expenditure came in at £1.4bn over the year, an increase of 9.8pc. Of this, £784 million was spent on renewable energy projects. This year, the company plans to spend £1.7bn. Adjusted net debt was £5.9bn at the end of the year, compared with its market capitalisation of £12.6bn.
In the year just ended, SSE raised its dividend payment by 7.1pc to 75p a share. The final payment of 52.6p will be paid on September 23 and the annual dividend is covered by earnings 1.5 times. New investors can buy the shares before July 27 to qualify for this payment.
Vodafone’s results were better than market expectations because of solid sales of mobile data services used by people on smartphones to surf the internet or download music to their mobile devices.
In the last financial year revenue from data services was up 26.4pc on a year-on-year basis to £5.1bn. This segment now represents 12pc of group service revenue. Overall revenues rose 3.2pc to £45.9bn and pre-tax profits rose 9.5pc to £9.5bn.
In May last year, Vodafone declared a dividend policy that would see shareholder payouts grow “at least 7pc per annum” for each of the financial years in the period ending March 2013.
In line with this policy, the final dividend of 6.05p a share brought the total annual payment to 8.9p – a 7.1pc year-on-year increase. The final payment will be made on August 5 and new investors can buy the shares to qualify for this payment before the end of May.
DII Snapshot service launched
DII Snapshot service launched
You may wonder whether any of the above mentioned companies represent ‘good’ value, right now? This is a very valid question, as the purchase price will determine your total return.
When you are interested in buying shares you have a vast universe of companies to choose from. When you decide to sell, you are limited to only those companies whose shares you have bought previously.
To maximise your returns it makes sense to purchase your shares when they are ‘good’ value - in my book, that is when they are historically undervalued.
But when is a dividend paying company ‘good value’? Is the company currently undervalued or overvalued? Is it a 'buy' or a 'sell'?
And that’s precisely what our new, bespoke DII Snapshot service offers.
You let us know which dividend paying company you are interested in. We will provide you exclusively with a concise valuation of this company based on our dedicated valuation methodology.
And of course you will also be able to check whether the shares that you own in dividend paying companies are currently historically undervalued or overvalued or are trading somewhere in between.
Order your DII Snapshots like the one we prepared on Severn Trent recently, which you can download for free Here
UK's credit rating under threat?
Two relatively unknown credit rating agencies have downgraded UK’s sovereign debt. I am not talking about Moody’s, Fitch or Standard & Poor’s, rather Weiss Ratings and China’s Dagong’s.
Dagong's ratings are not widely relied on by investors outside China. While US-based Weiss Ratings has only recently started to rate sovereign nations.
Dagong's and Weiss Ratings may well offer a more impartial view of UK's credit rating and the true health of government finances in Europe and North America
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Utilities are soo boring . . . Not!
Utilities enjoy safe and predictable revenues, earnings and therefore dividends. Utilities have been paying dividends with amazing regularity and in the main have raised their dividend payments every year for decades.
That's the type of utilities we are after at Dividend Income Investor.com if we can get them when they are historically undervalued.
From an investment perspective, realise that:
- basic utilities provide electric, gas, and water services, so their products are in demand no matter what the economy is doing
- their relative revenue stability enables these companies to consistently pay their shareholders above-average dividend yields
utilities’ businesses benefit hugely from low interest rates. As they have massive infrastructure, they tend to borrow a lot of money to keep things running smoothly. As interest rates are low, they borrow at lower rates. Reduced operating costs equal bigger profits
the key to their growth is buying or building more (efficient) infrastructure that will ramp up their transmission capacity. The more ‘hardware’ -pipelines and electricity cables- they own the more cash flow they can generate, allowing stable dividend increases.
Dividend Income Investor.com prefers the type of utilities that don’t have a great deal of commodity price sensitivity.
Investors in say Royal Dutch Shell or BP are to a certain degree depended on the price of a barrel of oil or the price of natural gas. As we know, these fluctuate constantly and are difficult to predict.
In comparison to the oil and gas industry, pure utilities which transmit or transport energy aren’t extracting anything; instead they are moving it around. When they do so, they are often transporting it on a fixed fee basis. As a result, there is very little commodity price sensitivity.
That's exactly the type of utility we are after at Dividend Income Investor.com and that’s why we have extensively reported on exactly one of these utilities in our latest Dividend Income Report, alerting our subscribers to its historically undervalued share price.
Make sure to benefit from the introductory discounts currently still available. Act Now, as we will be removing them in the next few weeks.
Until next time.
Early Retirement Investor.com
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