In brief we have had a couple of AGM updates from stocks that feature in the Mechanical Compound Income Portfolio. See the Portfolio tab and scroll about half way down for more details of this if you are not familiar with it.
The first statement was from Alliance Pharma (APH) who reported some reasonable revenue growth overall and from a recently acquired product, which is something they tend to do on a regular basis. The also flag that they have financing available to look at more of these.
The shares have had a reasonable run after trading sideways for years and perhaps, if they can get the earnings moving ahead, then maybe they could sustain a breakout. This might allow a move up to say 50p which would leave it on a more full looking rating of 14 to 15x. However as you can see from the chart below they are looking over bought in the short term with some negative divergence on the RSI suggesting a loss of momentum in the short term. So personally I'm wouldn't be chasing this one up here, but it might be worth revisiting on a pull back below 40p to fill a gap on the chart which I guess could be facilitated by them going ex the final dividend next month.
Meanwhile the other topical stock PLUS500 (PLUS), that features in the same portfolio, has also had an AGM statement out this morning. As I'm sure there will be lots of commentary on this one I'll not cover the detail. However I note that they are talking about Q2 revenues being down and being hit by $4m in the last two weeks due to the regulatory issues. They also flag marketing costs being "appreciably" higher and a "conservative" estimate of £2m of extra costs for the remediation work. I also note that they now say that this is likely to take "approximately" a month rather than the days or a week or two that some had hoped. So all in all I would expect to see some downgrades coming through on the back of this.
They have also partially backed down on a controversial salary increase for directors saying that if it is approved none of them will take the raise until this situation is resolved. They also refuted a number of the allegations surrounding their accounting.
Thus a fairly full response from the company to clarify the situation which may help to reassure and further the recovery in the share price that was seen yesterday. I guess time will tell how serious this set back turns out to be and it may prove to have been a great buying opportunity. However, personally I am not prepared to buy into this one but I will see how it looks when I come to do the quarterly review for the Mechanical Compound Income Portfolio at the end of June.
..after no posts for a couple of days - sorry about that but had a technical glitch on Tuesday which meant I lost my note so I gave up in frustration and there wasn't much of note yesterday morning.
By way of catch up I was writing about Talk Talk's (TALK) update on Tuesday which seemed positive in the main. However they did reduce their guidance to the bottom of the range on the back of their cost reduction plans being impacted by the recent Blinkbox acquisition and other costs associated with that. This has been a familiar pattern with this one over the last few years as they have been either investing in their network or building their TV business. Despite this they have during this period continued to pay a generous dividend and increased it by 15% per annum.
This was the main attraction plus a low rating when I first got into this one back in 2012. I have enjoyed the rapidly rising dividends since then and the shares have been re-rated despite the limited earnings growth on the back of the investment in the business. Thus it now looks a bit stretched in valuation terms, but the yield remains attractive at 4.3% for this year, although the cover is now pretty thin given the limited earnings growth since 2012.
Consequently I did reduce my holding recently ahead of this statement with the shares close to resistance levels from previous peaks and given the valuation, estimate revisions trend and now thin cover. I did however, retain some as the yield looks like it will continue to grow for now despite the cover and hopefully one day the profits will flow to support it further. The other unknown factor which could be a positive for them is the on going consolidation in the telecoms market with BT buying EE and Sky looking to offer mobile. As a smaller player in the market is would seem Talk Talk could be a good merger or acquisition partner for a bigger group.
Talking of bigger groups we did have Final results from GlaxoSmithkline (GSK) yesterday lunch time which seem to have been well received and they confirmed a 3% increase in this years dividend to 80 pence. They also confirmed that they intend to maintain this level of payment for the coming year and they are also intending to pay a special dividend to return net capital proceeds realised from a corporate transaction which is expected to complete in the first half of this year. This could equate to around another 80 pence or so, providing an income boost for GSK shareholders.
However, as I have warned before this could be the last hurrah on the income front for GSK. After the business disposal and as the new Chairman gets to grips with the business and look at re-shaping it further going forwards, I suspect the dividend may be re-based as a result after this year.
Today we also had results from another big yielding stock in the pharmaceutical sector Astra Zeneca (AZN). They continued their progressive dividend policy and thereby maintained their dividend at 280 cents despite lowish earnings cover. The yield here is lower at 3.8% versus the 5.5% for GSK probably reflecting the higher cover at AZN and therefore less risk of a reduction going forward, but I note that the shares are still below the level of the Pfizer bid that they rejected last year.
On balance these are good quality companies with decent yields, but they are not especially cheap and the lowish cover and lack of growth in the dividends going forward make them less attractive now in my book and on the Compound Income Scores.
Finally, regular readers will know that I have a penchant for adding music tracks to my Blog posts and in recent weeks and months I have been exploring a day of the week theme with such songs as Blue Monday, Ruby Tuesday and Black Friday.
So with today being Thursday it set me thinking about an appropriate song for today. Now while David Bowie did do a song featuring Thursday it was unusually awful for him, so I will not inflict that on you. Instead I've come up with something that I think is more appropriate given my more lackadaisical approach to my blogging this week. So enjoy a laid back - Thursday (Here's Why I did not go to work today) by Nilsson. Must admit I'm never too sure if people like or appreciate these songs I add onto my blogs, so do get in touch with a comment or a tweet and let me know either way.