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..to a new high on FTSE 100, although personally I wouldn't get too excited about that. I guess we might see it consolidate it's recent gains to try and confirm a break out, but in the meantime I'll be continuing to focus on individual stocks.  Talking of which, while I was away last week I see we had amongst other things like the budget, final results from EMIS the healthcare software provider, Phoenix Group (PHNX) the closed life consolidator and a Q3 trading update from IG Group (IGG). I also note that there were the usual strong results from Next (NXT) although marred somewhat by a more downbeat / realistic assessment of the growth prospects for the current year from their highly regarded CEO Simon Wolfson. This probably makes sense with the forthcoming election and the associated uncertainty given the range of possible outcomes.
Of the others IG Group seemed fine ex the hit from the Swiss Franc move, while Phoenix Group results seem to have been well received with the shares moving up further, although I note they only maintained and talked about a sustainable dividend on the back of cash flows from their closed books of life policies. They also paid down some debt and are targeting an investment grade credit rating, although I note their debt pay down is expected to slow this year. Thus it seems OK so maybe my concerns on this one are misplaced, but as I'm not desperate for yield I'd rather focus on stocks with lower yields and better growth prospects. EMIS results seemed fine and the outlook statement struck a positive tone, but the shares were largely unmoved on the back of this. This probably reflects the re-rating the shares have enjoyed in the last year as they have risen from around 600 pence when I first wrote them up. With the shares now closer to 900 pence and not far off their all time high, they now look less attractive as the rating has moved up close to 20x this years forecast earnings and the expected yield is only just over 2% at 2.24% which leaves it close to being a sell on my 2% & 20x sell discipline. That being said it seems set fair and the quality is reasonable and they seem to have been able to grow the dividend by around 10% over the last 5 years including the latest 18.4p dividend. So the returns should be acceptable, it is just the price you have to pay now is getting quite high, so probably not one to chase up here. Today in brief I note that Matchtech (MTEC) which I wrote up in February has announced some contract extensions and a new contract with Southern Water which as Keith Lewis, Chief Operating Officer of Matchtech Group plc, said: "These contract wins clearly demonstrate how the breadth and knowledge of our specialist recruitment teams is enabling the Group to meet the demands of new and existing clients alike in sourcing high quality candidates across both the engineering and professional sectors." These shares have not moved much and still look good value on around 13x with a 4%+ yield and the benefits of the acquisition of Networkers International still to come. Apart from that finally I note that Pennon Group (PNN) have confirmed a continuation of their RPI+4% dividend policy to 2020 after the recent regulatory review completed. So on a yield of close to 4% that doesn't seem too bad if not outstanding, cheers.
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In recent posts I have been discussing Europe, songs and also looking at the Compound Income scores in the context of some individual stocks such as Centrica. Today I am going to explore these themes further as I have another sell recommendation for you. This however, will I suspect be of quite limited interest, unless you hold it, so I'll try and keep it brief. The stock concerned, as you may have guessed from the title is Phoenix Group (PHNX) - the closed life insurance business. I first switched into this one back in 2013 as a bond alternative with the prospect of some modest dividend growth. Since then it had a wobble about a year ago when the chancellor announced dramatic changes to the pensions industry, but has recovered well since then as you can see in the chart below. However I'm getting worried about this one now and thinking I should run for the exit.  So with a 6.3% bond busting yield, what's the problem? Well I said I would try and keep it brief so you can then do your own research and make your own mind up. So my three main reasons to run are as follows:
I prefer to try and avoid that type of thing in advance so as I don't like the look of the above three factors which makes me nervous and want to say or sing run run run, now seems like a good time for me to head for the exit as a precaution. However I could be wrong and if it just carries on churning out the dividends from its closed books I guess it could be OK, so do your own research and make your own mind up if you do hold it. Finally talking of run run run and bringing back in the European theme I came across the following video from a French band which seems appropriate to this note, au revoir. |
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