I have been remiss in not updating on my little portfolio of FTSE-100 dividend munchers for a while: it is time to make amends. This was a small portfolio put together in the hope of beating bank interest, but from a point of view of being bearish on the market. It has been a bumpy ride, but at least I am still ahead of Neil Woodford! The four stocks so far are BT (BT.A), Centrica (CNA), ITV (ITV) and a half-portion of Vodafone (VOD)...
The best performer is BT: having entered at 225.4p the shares are currently marginally higher at about 230p and I’ve had 15.17p in dividends to clock up an overall gain of 8.7% in around a year. When I bought this one it seemed to be a stock you could just forget about – so long as it could afford to carry on with the dividend, and the yield on offer is currently 6.6%. But with a still relatively new chairman and now a new CEO, the next set of results will attract a bit more attention than usual. Can BT afford to carry on paying its generous dividend or might it get chopped? It still has pension liabilities to deal with and growth had more or less stalled. On the plus side, it could sell off some assets which could transform things – the most obvious being OpenReach which the regulators have ring-fenced from BT at a management level anyway. On a smaller scale, there were suggestions last year that BT could sell off its masts and then there is the Italian arm which caused a spot of bother. Or we could see a restructuring and load of P45s as BT pushes to make itself more efficient, and further efforts to push its TV package as part of its quad-play? With a new team at the helm, now would seem to be the most obvious time to hack the dividend if it is going to. On the other hand, if it is going to sell off a few bits, why not start that now? And all the while, activist investors are on the share register who will be pushing for something more radical than more of the same. Well, BT has its first round of numbers under the new CEO Philip Jansen due out on 9 May – the 2018 FY results so we shall know the truth soon enough, and especially about that juicy dividend. Fingers crossed, we should get some sign that the deep value within BT can be released but at the very least I’m hoping my dividend is safe, so I can forget about this share once more.
Centrica has been in the headlines for all the wrong reasons lately. With gas and electricity providers struggling as an industry, questions are being raised over whether Centrica’s generous dividend can really survive. With the shares having headed sharply south, its yield is now up to a stonking 11.35% - which means that the market has it down as a racing certainty to be chopped. At the last report it was still losing customers, still suffering nuclear difficulties, earnings per share came in below the dividend and seem set to fall further. And with eleven of its industry rivals having gone to the wall recently, it is clearly a tough environment to be in. But rather than hunker down and focus on the job, there have been big pay rises and bonuses. So whilst staff are being fired and shareholders suffer, the man at the top got a whopper of a pay packet. I’ve said my piece on this already, but the bottom line is that this is quite simply unacceptable. Sure, have a bonus and a big pay rise if you deliver improved performance but you can’t take it in the middle of all this. It just sends all the wrong messages, and tells me – the little guy – that the boardroom is only interested in itself. With the AGM on 13 May, I shall be taking a long careful look at my broker account to see about registering my protest – for what it is worth. Aside from that, Centrica does look strong enough to see out the current industry malaise, and Chris Bailey regarded Centrica’s dealings over the price cap as pretty successful. Jobs are being cut and cost taken out of the business but I would like to see those customer losses reversed. There remains much to do, but I don’t think selling up now is the right thing to do. But I would like to sell its management, which risks cutting jobs, hacking the dividend and paying itself a monster pay-rise for missing all its own targets. My entry point here was just shy of 143p so with the shares down at a lowly 105.75p I’m licking my wounds (even if I chopped a bit at 162.8p). But having bagged 12p in dividends so far the drop isn’t quite as dramatic, although a still painful (official) 17.7%. I’m sure the rising possibility (give me strength) of a Corbyn-led government is also dragging the shares lower – something I hope will change over the coming months. But I am hopeful that Centrica will ride out the storm and that profits will recover to pay a decent income – and that therefore the share price will head northwards once more. Meanwhile, we have a trading update to look forward to on 13 May, the day of the AGM. Let’s hope the update really is worth looking forward to…..
Vodafone was the most obvious early blunder when I piled in for a half-sized holding at over 190p. The stock is now just 142.56p – and that is off the low point set just last month almost at 130p. Thankful for small mercies…..With 4.3p in dividends clocked up I am now (only!) 23% off on this one but I have not lost hope of some recovery. For a start the broker community appears heavily divided on where they think the shares are going. The most recent note – from Deutsche Bank saw the chopping of the price target from 268p to 250p and Numis came in with 220p in February, along with Bank of America at 200p and Citigroup was also positive. Against them we have RBC Capital Markets and Macquarie at just 125p. Clearly someone is going to end up with egg on their face but it does suggest that there could be some upside as we are at the lower end of that spectrum. My overall impression is that Vodafone has been paying heavily for 5G licenses, but more recent sharing deals could take the sting out of that. And, like BT, Vodafone could sell off its mobile masts to bring in a few shekels. But the highlight for me comes on 14 May when Vodafone releases its FY18 numbers under the now promoted CEO, its former FD. I’ll keep my fingers crossed for good numbers – and not too much emphasis on adjusted EBITDA (bullshit squared numbers). We’ve seen Vodafone share price nose-dive before, only for it to recover and I fancy the same will happen again.
Finally, ITV seems to be having a better run of things. This is another one where I sliced a bit off after an early rise (but ignore that for the purposes of the portfolio overall score). Having bought in at 143.7p, the shares bottomed out at almost 120p but are now back up to 140.3p and I have 8p of dividends in the bag so I’m up by a fairly marginal 3.2%. With a spot of luck, Chris Bailey’s heroine will produce a steady improvement in numbers as we go forward, but that stake held by Liberty Media seems to underpin ITV: if McCall delivers than all is good. If she doesn’t than Liberty will strike. With the dividend raised a notch last time, I'm quite happy to hold on, and look forward to the trading update on 8 May. And so to the overall scores... Last time I was 6% down and now I am off by 4.9% - better, and still beating Neil Woodford whose equity income fund is down by 7.8% over the past year (including dividends), but not quite what I was looking for. But with BT reporting under its all-new management and numbers from Vodafone next month, as well as trading updates from Centrica and ITV, I fancy there could be some big moves coming up. Let’s hope those moves are northwards! And I am still prevaricating over the next investment. Will it be Centamin (CEY) or possibly a Neil Woodford reject? I hope to make a decision in the next month or so.
Filed under: BT, Centrica, ITV, Vodafone, Johnny Mercer, Optibiotix, Ascent Resources, I3, Biome, Purplebricks
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