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Thursday catch up...

5/2/2015

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..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.


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