Showing posts with label yields. Show all posts
Showing posts with label yields. Show all posts

Friday, October 25, 2019

Contact Energy: Buy for Yield





Last time we talked about this one it was selling at about $7.50   Little did I know about it when I wrote about it in June that yesterday it was trading at $7.68.

It has traded at a high of $9.05c and was savaged recently when Rio Tinto decided it was going too do its semi annual raid of the taxpayer dollar by sticking its hand out - BUT quite rightly Labour said NO.

That is the ONLY thing this writer sees fit that Labour have done.

It is paying a good dividend of 5.7% which is forecast to stand still next year. Pretty good return when compared with a 2.5% gain in the bank.

I know I said sell before but I have changed my mind.

With CEN only supplying 10% of the power to Tiwai Point (the smelter) that lot should be gobbled up pretty quickly should the padlocks need to come out for Rio Tinto. It means Contact Energy will not have to spend as big for many many years on new power sources.

But there will a few casualties if Rio decide to go - those with high debt may need to start looking around for cheaper rates.

You would do well to have a few thousand of these to pay the power bill every year.




c Share Investor 2019



Monday, March 15, 2010

Share Investor Short: Warehouse Group yield worth a look - A second look

Chart forWarehouse Group Ltd (The) (WHS.NZ)

I wrote about this back in September 2009 just after the 2009 full year profit was announced and a 15.5c dividend was declared. The share price was NZ $4.25 at the time.

The WHS 2010 half year profit was released last Friday and a 17c dividend was declared. The current trading price of WHS shares is $3.90 so clearly the opportunity this time is even better than last year.

It is called dividend stripping.

Dividend stripping* is something worth doing. That is, getting in early when a good dividend is announced and riding the share price upwards before the dividend is paid or holding on to collect the dividend then ditching the stock, depending on how you think the market will treat the company post dividend.

I may or may not have done this over the years and if I did it certainly wasn't my intention to do so, yeah OK.

The Warehouse have been increasing dividends of late because of unused tax credits held by them and a better looking cash flow situation.

With cash flows up considerably this year the dividends are now rolling in again.

If you add the 30% imputation credits and are able to use them to offset taxes then you are in for a payout of :

17 c dividends + 5.11c tax credits = 22.1c , which equates to around a 5.5% gross return at the market share price on Monday 15 March of NZ$3.90 - the net return is obviously higher if you are able to fully use the tax credits.

An excellent short term payout for doing next to nothing and it is better than a term deposit because it does not take a full year to payback.

There is also the probability that those after the dividend will push up the stock price to enable you to get out with a good capital gain before the dividend is paid, if you wish to do so.

Of course, and I have to get this in before I wrap it up. If you are a long-term shareholder in the company your return for the year would have been a 32.5c per share net dividend and the possibility of more than 10c in tax credits - a plus 10% net return for the year based on my share purchase price.

Long term wins again but who says you cant have the best of both worlds!



* Of course as one reader pointed out in September 2009, the process of dividend stripping, if the intention is to do that, the capital gain that you make is taxable.


The Warehouse Group @ Share Investor

The Warehouse Group: 2010 Interim Profit Review
The Warehouse: Big Brands, Big Opportunities
Warehouse strike opportunity to buy
Long Term Play: The Warehouse Group
Share Investor Short: Warehouse Group yield worth a second look
Woolworths supermarket consolidation an indicator of a move on the Warehouse?
Stock of the Week: The Warehouse Group
Warehouse 2009 interim profit a key economic indicator
When will The Warehouse bidders make their move?
Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
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MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Share Investor Forum
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Related Amazon Reading

Dividend Capture
Dividend Capture by Barbara, L Minton
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c Share Investor 2010