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Barratt Developments Annual Results Announcement posted on Company News.

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idpickering
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Barratt Developments Annual Results Announcement posted on Company News.

#439139

Postby idpickering » September 2nd, 2021, 7:16 am

Here; viewtopic.php?p=439137#p439137

Final ordinary dividend per share of 21.9p (2020: nil; 2019: 19.5p) together with the interim dividend of 7.5p (2020: nil; 2019: 9.6p) resulting in a total ordinary dividend for the financial year of 29.4p (2020: nil; 2019: 29.1p).


I think some here hold these, so this item may be of interest to them.

Ian.

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Re: Barratt Developments Annual Results Announcement posted on Company News.

#439252

Postby Gengulphus » September 2nd, 2021, 1:56 pm

Direct link to the RNS announcement: https://www.investegate.co.uk/barratt-d ... 00064641K/

It contains fuller details of the the dividend in the following quote (which implies an ex-dividend date of September 30th):

The Board established a new dividend policy based on an ordinary dividend with a 2.5 times dividend cover in 2020. The Board was delighted to resume dividend payments with the declaration of an interim dividend of 7.5 pence per share in February 2021 and is pleased to recommend a final dividend of 21.9 pence per share (2020: nil pence per share). Subject to shareholder approval, the final dividend will be paid on 9 November 2021 to those shareholders on the register as at the close of business on 1 October 2021. The total proposed ordinary dividend for 2021, including the interim dividend of 7.5 pence per share paid in May 2021, is 29.4 pence per share (2020: nil pence per share; 2019: 29.1 pence per share).

That gives the impression that after a year off, dividends are back and indeed 1% up on 2019 - but that impression is rather misleading. Barratt Developments started a habit of regularly paying 'special' dividends in 2015, and the 'special' boosted the dividend income a HYPer would have received from the company by about 60-70% in each of the years 2015-2019. Those 'specials' are not back along with the ordinary dividends, and the report shows no sign that the company intends to reinstate them in the future. Indeed, it barely mentions them at all - as far as I can tell, the only mentions are in the comparatives column of the section "2.4 Dividends" table (where accounting standards almost certainly say it must be included) and in a sentence "Following the lockdown introduced by the UK Government in response to COVID-19, in order to manage its cash flows and capital structure, the Company paid no final dividend or special cash payment in respect of the year ended 30 June 2020." (where the fact that it was a dividend is downplayed by just describing it as a "payment").

Anyway, the net result is that although the report presents the reinstated dividend as a 1% increase on 2019, the total a HYPer's bank account will see for 2021 is a 7.5p interim + 21.9p final = 29.4p per share compared with a 9.6p interim + 19.5p final + 17.3p special = 46.4p in 2019, a 37% drop in income from the holding compared with 2019.

Calling dividends 'special' does carry an implication that the directors don't feel the same pressure to maintain them as for ordinary dividends - i.e. it's a "more liable than ordinary dividends to be cut" warning flag. In some cases, the 'special' dividend is practically certain not to be maintained, e.g. because a company is distributing a one-off windfall; in others (Admiral, for instance) paying the 'special' dividend seems to be a very well-established habit and one might feel it is pretty certain to be maintained; and of course there's a range of severities of warning flags inbetween, such as Barratt. But as a practical point, I'd recommend always treating 'special' dividends as carrying that warning flag - the question one should ask oneself is not "is there a warning about this dividend?", but "what is the danger being warned about, how likely is it to materialise, and how serious are its consequences liable to be if it does materialise?".

That's a point I've made before about 'special' dividends (though not recently), but this episode has made me realise that habitual 'special' dividends (which I've quite often referred to in the past as 'not-so-special' dividends) also carry opportunities for 'spin'...

By the way, I'm not saying in the above that I wouldn't touch Barratt with a bargepole or anything like that. It's in my HYP, has been since late 2002 (with various top-ups and top-slices along the way), and has performed pretty well (XIRR on the holding history currently gives 9.61%), albeit with a bit of a chequered dividend history - like many HYP shares, it definitely needs to play with a well-diversified team! So I'm not planning to sell it for having had its dividends interrupted by Covid, nor for indulging in a bit of 'spin' about how good its recovery has been. But I have noted that 'spin', and may well take it into account in future top-up and top-slicing thoughts...

Gengulphus


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