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Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

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IanTHughes
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Re: Maintained/increased dividends

#315086

Postby IanTHughes » June 4th, 2020, 11:24 am

Dod101 wrote:Rio should have been included and I think maybe Prudential. The doubt is because the yield is modest.

Imperial and now Pennon should be removed as they are both cutters, although for reasons nothing to do with Coronavirus. I think the others are still OK for now anyway.

Pennon Group PLC (PNN) has just announced an annual dividend increase of 6.60%.

Not a cutter in my book!


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Re: Maintained/increased dividends

#315090

Postby Dod101 » June 4th, 2020, 11:29 am

Well it has just announced also that it is about to become a rebaser. Maybe removing it from the list is a bit harsh but people can make up their own minds. I do not hold and will not be investing for reasons I have outlined on its thread.

Dod

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315091

Postby monabri » June 4th, 2020, 11:32 am

Arborbridge wrote:"The remaining element of the Net Cash Proceeds, after deducting the amounts used to reduce net borrowings and reduce the pension fund deficit, will be returned to shareholders subject to other value creating investment opportunities that may arise for the Continuing Group. In determining the optimal route to return a portion of the proceeds to Shareholders, the Board will consider a number of factors including prevailing market conditions, the balance of shareholder preference and the scale of proceeds to be returned."


Arb.


I've done the sums for them already! I eliminated debt and the pension deficit completely and was left with a chunk of change to pay back to the owners. In the absence of any investment ideas, what else is there?

( maybe I should have added in a vast chunk of money for consultant fees...sarcasm mode off?).

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Re: Maintained/increased dividends

#315093

Postby IanTHughes » June 4th, 2020, 11:35 am

Dod101 wrote:Well it has just announced also that it is about to become a rebaser. Maybe removing it from the list is a bit harsh but people can make up their own minds. I do not hold and will not be investing for reasons I have outlined on its thread.

No, they are not "re-basing" the dividend. They are selling off a large chunk of the business, returning capital to shareholders, and have simply indicated what the dividend is expected to be after that return of capital, from what will be a significantly smaller company.

To call it a "dividend cut" is disingenuous to say the least, and very misleading!


Ian

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315098

Postby IanTHughes » June 4th, 2020, 11:41 am

monabri wrote:
Arborbridge wrote:"The remaining element of the Net Cash Proceeds, after deducting the amounts used to reduce net borrowings and reduce the pension fund deficit, will be returned to shareholders subject to other value creating investment opportunities that may arise for the Continuing Group. In determining the optimal route to return a portion of the proceeds to Shareholders, the Board will consider a number of factors including prevailing market conditions, the balance of shareholder preference and the scale of proceeds to be returned."

I've done the sums for them already! I eliminated debt and the pension deficit completely and was left with a chunk of change to pay back to the owners. In the absence of any investment ideas, what else is there?

I know that you are only "guessing" but is it not more likely that, whilst debt will undoubtedly be reduced, the company will still be indebted, probably in line with its debt ratios now?


Ian

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315108

Postby dealtn » June 4th, 2020, 12:02 pm

Arborbridge wrote:In general, I've never quite understood why companies sell off "good bits" of themselves, unless there are some cracking ideas for developing some other part of the business. It's a moot point whether that often happens or whether it is just some executive money making procedure.



If the market values something at say £2, and somebody comes along and offers £3 for it, why wouldn't you at least consider it? That's called acting in the shareholders best interests. It doesn't matter if that's "family silver" or "family brass", or whatever. The corporate activity is outing value.

Now even if capital is a secondary consideration, if that £2 is providing an income of say 10p, or a 5% yield, and someone offers you £3 that you could re-invest elsewhere at 5% (or even 4%!) you get a chance to increase your income from 10p to 15p (or 12p). Odd that a strategy that is looking for growing income doesn't embrace the chance to do just that.

I haven't looked at the details of this particular case, but that's why companies (and their shareholders agree) sell off their assets, even if they are "good bits".

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315115

Postby Arborbridge » June 4th, 2020, 12:19 pm

dealtn wrote:
Arborbridge wrote:In general, I've never quite understood why companies sell off "good bits" of themselves, unless there are some cracking ideas for developing some other part of the business. It's a moot point whether that often happens or whether it is just some executive money making procedure.



If the market values something at say £2, and somebody comes along and offers £3 for it, why wouldn't you at least consider it? That's called acting in the shareholders best interests. It doesn't matter if that's "family silver" or "family brass", or whatever. The corporate activity is outing value.

Now even if capital is a secondary consideration, if that £2 is providing an income of say 10p, or a 5% yield, and someone offers you £3 that you could re-invest elsewhere at 5% (or even 4%!) you get a chance to increase your income from 10p to 15p (or 12p). Odd that a strategy that is looking for growing income doesn't embrace the chance to do just that.

I haven't looked at the details of this particular case, but that's why companies (and their shareholders agree) sell off their assets, even if they are "good bits".


Seems like we are back to the usual differences between us, as the other day.

If you have an asset which is making the money roll in, and in, and in - I see no reason to sell it for a trifling uplift in the price. That is, I might do that, if there was some cracking project I could reinvest in, but I've not heard mention of it.

Like all takeovers, it is regarded as "in the interests of shareholders" if there is a premium to the price: that's true if the object of shareholders is just to out an asset value. With that argument, we could in principle, end up with no stock market investments at all, and then the question is whether the pseudo income released is sufficient to one's needs for ever and a day.

Still, the conversation you have initiated will lead to an OT discussion if we go further, so I will end there. Just to say, I buy shares for the income as do all HYPers, and if the assets are worth more, that's fine, but I'm not in the habit of selling - I prefer continued income generation. As mentioned in this thread: if you sell, you need to find somewhere as good or better for the funds to justify doing so.

I doubt many HYPers would agree with your POV.

Arb.

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315121

Postby dealtn » June 4th, 2020, 12:31 pm

Arborbridge wrote:
dealtn wrote:
Arborbridge wrote:In general, I've never quite understood why companies sell off "good bits" of themselves, unless there are some cracking ideas for developing some other part of the business. It's a moot point whether that often happens or whether it is just some executive money making procedure.



If the market values something at say £2, and somebody comes along and offers £3 for it, why wouldn't you at least consider it? That's called acting in the shareholders best interests. It doesn't matter if that's "family silver" or "family brass", or whatever. The corporate activity is outing value.

Now even if capital is a secondary consideration, if that £2 is providing an income of say 10p, or a 5% yield, and someone offers you £3 that you could re-invest elsewhere at 5% (or even 4%!) you get a chance to increase your income from 10p to 15p (or 12p). Odd that a strategy that is looking for growing income doesn't embrace the chance to do just that.

I haven't looked at the details of this particular case, but that's why companies (and their shareholders agree) sell off their assets, even if they are "good bits".


Seems like we are back to the usual differences between us, as the other day.

If you have an asset which is making the money roll in, and in, and in - I see no reason to sell it for a trifling uplift in the price. That is, I might do that, if there was some cracking project I could reinvest in, but I've not heard mention of it.

Like all takeovers, it is regarded as "in the interests of shareholders" if there is a premium to the price: that's true if the object of shareholders is just to out an asset value. With that argument, we could in principle, end up with no stock market investments at all, and then the question is whether the pseudo income released is sufficient to one's needs for ever and a day.

Still, the conversation you have initiated will lead to an OT discussion if we go further, so I will end there. Just to say, I buy shares for the income as do all HYPers, and if the assets are worth more, that's fine, but I'm not in the habit of selling - I prefer continued income generation. As mentioned in this thread: if you sell, you need to find somewhere as good or better for the funds to justify doing so.

I doubt many HYPers would agree with your POV.

Arb.


You asked in the general why companies sell off assets, not the specifics of this case, or what investors should do, and that is how I answered.

(I suspect a lot of Income seekers would agree with me for a 50% increase in value over market - I can't speak for HYPers, but it would be interesting to hear their objections other than in the "trifling uplift" case, but as you say that is for another thread).

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315131

Postby IanTHughes » June 4th, 2020, 12:41 pm

Arborbridge wrote:
dealtn wrote:
Arborbridge wrote:In general, I've never quite understood why companies sell off "good bits" of themselves, unless there are some cracking ideas for developing some other part of the business. It's a moot point whether that often happens or whether it is just some executive money making procedure.

If the market values something at say £2, and somebody comes along and offers £3 for it, why wouldn't you at least consider it? That's called acting in the shareholders best interests. It doesn't matter if that's "family silver" or "family brass", or whatever. The corporate activity is outing value.

Now even if capital is a secondary consideration, if that £2 is providing an income of say 10p, or a 5% yield, and someone offers you £3 that you could re-invest elsewhere at 5% (or even 4%!) you get a chance to increase your income from 10p to 15p (or 12p). Odd that a strategy that is looking for growing income doesn't embrace the chance to do just that.

I haven't looked at the details of this particular case, but that's why companies (and their shareholders agree) sell off their assets, even if they are "good bits".

Seems like we are back to the usual differences between us, as the other day.

If you have an asset which is making the money roll in, and in, and in - I see no reason to sell it for a trifling uplift in the price. That is, I might do that, if there was some cracking project I could reinvest in, but I've not heard mention of it.

Like all takeovers, it is regarded as "in the interests of shareholders" if there is a premium to the price: that's true if the object of shareholders is just to out an asset value. With that argument, we could in principle, end up with no stock market investments at all, and then the question is whether the pseudo income released is sufficient to one's needs for ever and a day.

Still, the conversation you have initiated will lead to an OT discussion if we go further, so I will end there. Just to say, I buy shares for the income as do all HYPers, and if the assets are worth more, that's fine, but I'm not in the habit of selling - I prefer continued income generation. As mentioned in this thread: if you sell, you need to find somewhere as good or better for the funds to justify doing so.

I doubt many HYPers would agree with your POV.

I can only answer for this HYPer, but I do agree!

Assuming this transaction will release capital that can then be re-invested in a higher yield, what is not to like? The only irritant is that some work is required in selecting a new holding!


Ian

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315148

Postby Arborbridge » June 4th, 2020, 1:07 pm

IanTHughes wrote:I can only answer for this HYPer, but I do agree!

Assuming this transaction will release capital that can then be re-invested in a higher yield, what is not to like? The only irritant is that some work is required in selecting a new holding!


Ian


One could sell any HYP share, release capital and achieve a higher yield by reinvesting, with the sole exception of the highest yielding share of all :lol: I do not accept the validity of that argument because it is single dimensional - i.e. does not take into account the mix of other desirable HYP requirements.

In PNN's case, without selling off Viridor the yield was acceptably high, so one would not have sold it. PNN was a reasonable contributor towards a high and rising income and fullfilled the HYP agenda.

After the sale of Viridor (well, actually well before it because the news was in the price) the yield fell, of course, but only as a result of selling of a huge chunk of itself.

Arb.

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Re: Maintained/increased dividends

#315153

Postby Arborbridge » June 4th, 2020, 1:10 pm

IanTHughes wrote:
Dod101 wrote:Rio should have been included and I think maybe Prudential. The doubt is because the yield is modest.

Imperial and now Pennon should be removed as they are both cutters, although for reasons nothing to do with Coronavirus. I think the others are still OK for now anyway.

Pennon Group PLC (PNN) has just announced an annual dividend increase of 6.60%.

Not a cutter in my book!


Ian


For this year, but also announced that it will be a cutter. Facing two ways at once, which makes it a hard case.

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Re: Maintained/increased dividends

#315156

Postby Arborbridge » June 4th, 2020, 1:15 pm

IanTHughes wrote:
Dod101 wrote:Well it has just announced also that it is about to become a rebaser. Maybe removing it from the list is a bit harsh but people can make up their own minds. I do not hold and will not be investing for reasons I have outlined on its thread.

No, they are not "re-basing" the dividend. They are selling off a large chunk of the business, returning capital to shareholders, and have simply indicated what the dividend is expected to be after that return of capital, from what will be a significantly smaller company.

To call it a "dividend cut" is disingenuous to say the least, and very misleading!


Ian


dividend will move from around 40p to around 20p - in my book that's a cut, and willl directly impact on our incomes - until and unless there is some other compensation. If you read the document, the quid pro quo is very uncertain and not without ways in which this compensation could largely evaporate or be absorbed in other ways which do not out themselves in dividends.
Next year, when one makes up one's income book, it will show less income unless there is a substantial special, and that's the important reality.

So in practice is has to be regarded as a cutter, if only because the certainty of outcome has been so hedge around.

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Re: Maintained/increased dividends

#315160

Postby Dod101 » June 4th, 2020, 1:21 pm

IanTHughes wrote:
Dod101 wrote:Well it has just announced also that it is about to become a rebaser. Maybe removing it from the list is a bit harsh but people can make up their own minds. I do not hold and will not be investing for reasons I have outlined on its thread.

No, they are not "re-basing" the dividend. They are selling off a large chunk of the business, returning capital to shareholders, and have simply indicated what the dividend is expected to be after that return of capital, from what will be a significantly smaller company.

To call it a "dividend cut" is disingenuous to say the least, and very misleading!


Ian


If you care to read the RNS fully you will see that they have used the word 'rebase' to describe their dividend plans for the future.

Dod

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315161

Postby IanTHughes » June 4th, 2020, 1:22 pm

Arborbridge wrote:
IanTHughes wrote:I can only answer for this HYPer, but I do agree!

Assuming this transaction will release capital that can then be re-invested in a higher yield, what is not to like? The only irritant is that some work is required in selecting a new holding!

One could sell any HYP share, release capital and achieve a higher yield by reinvesting, with the sole exception of the highest yielding share of all :lol: I do not accept the validity of that argument because it is single dimensional - i.e. does not take into account the mix of other desirable HYP requirements.

Please, I am not for one minute suggesting that, as an HYPer, I seek out such disposals and/or re-investment opportunities. However what I am suggesting is, if I am forced to "sell" part, or even all of a holding, as a result of a "market transaction", I am at least comforted when given the opportunity to increase my HYP's yield. I should also add that such "market transactions" may also present an opportunity to improve my HYP's diversification.


Ian

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315162

Postby Arborbridge » June 4th, 2020, 1:23 pm

IanTHughes wrote:
Dod101 wrote:Well it has just announced also that it is about to become a rebaser. Maybe removing it from the list is a bit harsh but people can make up their own minds. I do not hold and will not be investing for reasons I have outlined on its thread.

No, they are not "re-basing" the dividend. They are selling off a large chunk of the business, returning capital to shareholders, and have simply indicated what the dividend is expected to be after that return of capital, from what will be a significantly smaller company.

To call it a "dividend cut" is disingenuous to say the least, and very misleading!


Ian

Oh yes they are, in their own words:-

"The re-based dividend reflects the sector leading position of the Continuing Group,"

I don't believe Dod can be accused of disingenuous for using the company's own term for it. ;)

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315163

Postby PinkDalek » June 4th, 2020, 1:23 pm

Dod101 wrote:If you care to read the RNS fully you will see that they have used the word 'rebase' to describe their dividend plans for the future.


Isn't this the same discussion that is ongoing on the specific Pennon Group thread?:

viewtopic.php?p=314972#p314972

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315164

Postby Arborbridge » June 4th, 2020, 1:24 pm

Dod101 wrote:If you care to read the RNS fully you will see that they have used the word 'rebase' to describe their dividend plans for the future.

Dod


You beat me by two minutes!

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315166

Postby Arborbridge » June 4th, 2020, 1:26 pm

PinkDalek wrote:
Dod101 wrote:If you care to read the RNS fully you will see that they have used the word 'rebase' to describe their dividend plans for the future.


Isn't this the same discussion that is ongoing on the specific Pennon Group thread?:

viewtopic.php?p=314972#p314972


Similar, but started from a different context, and it isn't the same. But let's not get too meta-discussiony :)

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Re: Maintained/increased dividends

#315167

Postby Bouleversee » June 4th, 2020, 1:26 pm

PinkDalek wrote:
Bouleversee wrote:Yes, I do follow that, thanks, but it doesn't include all companies I own as many of them are too small.


Well it shouldn't include all/many of yours (such as those on AIM?) as both this topic and the other are clearly on High Yield Portfolios (HYP) - Practical. :lol:

Yes, I am well aware of that, hence my comment about being too small.

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Re: Pennon Group Full Year Results 2019/20 nb Dividend to be rebased Notice.

#315177

Postby IanTHughes » June 4th, 2020, 1:41 pm

Arborbridge wrote:
IanTHughes wrote:
Dod101 wrote:Well it has just announced also that it is about to become a rebaser. Maybe removing it from the list is a bit harsh but people can make up their own minds. I do not hold and will not be investing for reasons I have outlined on its thread.

No, they are not "re-basing" the dividend. They are selling off a large chunk of the business, returning capital to shareholders, and have simply indicated what the dividend is expected to be after that return of capital, from what will be a significantly smaller company.

To call it a "dividend cut" is disingenuous to say the least, and very misleading!

dividend will move from around 40p to around 20p - in my book that's a cut, and will directly impact on our incomes - until and unless there is some other compensation.

Incorrect! The dividend from the "rump" holding of Pennon Group PLC (PNN) will halve that is true, but a portfolio holding PNN will also gain income from the re-investment of the returned capital, which should be added to the "rump" dividend amount if one is to compare before the "sale of Viridor" with after the "sale of Viridor". If such a re-investment is at a higher yield it will be a dividend increase!

Arborbridge wrote:If you read the document, the quid pro quo is very uncertain and not without ways in which this compensation could largely evaporate or be absorbed in other ways which do not out themselves in dividends.

The £3.7 Billion will either be returned to the shareholder, who can then re-invest it in order to maintain or maybe even increase income, or else it will remain within the company, thus maintaining the value of the company, although probably decreasing the yield somewhat!
Arborbridge wrote:Next year, when one makes up one's income book, it will show less income unless there is a substantial special, and that's the important reality.

Next year, one's income will only reduce if the sale goes through. At which point the return of capital can occur and the re-investment of that returned capital should restore, maybe even increase, one's income. What is the problem with that?
Arborbridge wrote:So in practice is has to be regarded as a cutter, if only because the certainty of outcome has been so hedge around.


In practice, an increase of annual dividend by 6.60% is not a cut! In practice, nothing else has yet occurred!


Ian
Last edited by IanTHughes on June 4th, 2020, 1:48 pm, edited 1 time in total.


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