The FTSE special dividend option

There are quite a few FTSE350 companies lining up to pay special dividends alongside their usual dividend payment over the next few weeks. Starting with ITV and Admiral who go ex-dividend tomorrow.

ITV - current price around 125p, 1.8p dividend, special dividend 4.0p - total 5.8p per share.

Admiral - current price around 1293p, dividend 21.4p, special dividend 24.1p - total 45.5p per share.

Fidessa - current price around 1793p, dividend 24.5p, special dividend 45.0p - total 69.5p per share.

Antofagasta - current price around 891p, dividend 8.4p, special dividend 52.0p - total 60.4 per share.

888 Holdings - current share price around 169.5p, dividend 3.02, special dividend 1.34p - total 4.36 per share.

You can work out the % yourself, but only 888 at around 2.5% are paying something close to the very low IR's currently available on savings with your local friendly bank.

UK mining sector, what is it telling us?

Although the market has been steadily rising for some time it is perhaps difficult to believe that there have been losers also, most notably in the mining sector. This sector has seen quite a sell off in the last month, but some have been falling pretty relentlessly for longer than that. Here's a list of some FTSE350 mining stocks and their percentage fall in the previous 3 months.

African Barrick Gold -59.84%
Kazakhmys -57.54%
Hochschild Mining -45.59%
Fresnillo -30.50%
Antofagasta -30.47%

The 3 month change in the index is -15.94% and it is down -15.42 over the previous 12 months.

So, some hefty falls there and you do wonder if the world economy is in recovery mode, why are so many miners, the providers of commodities that go into making everything falling so steeply? Some of these are gold and silver miners, a sector that can be very volatile even when the price of gold is steadily going up, but the falls seem to be across the board even when good individual company results are produced.

Bargain hunters may well want  to keep an eye on the sector, but you may also want to watch for a recovery on the charts first as falls for the miners can be relentless. Get in at the wrong time and you can be looking at big losses. If anything this has been the sector to short, but could it also be a sign that the wider market may follow if economic growth forecasts don't live up to expectations as the year goes on?

The "Public Sector" Portfolio

This is just an idea I want to run with.  A portfolio of FTSE350 companies that to some extent depend on Government contracts for their business.  It will be interesting to monitor performance over time to see what effect austerity and Government cuts have on the bottom line for these companies.

I've chosen 4 to follow;

Capita 

Capita is one of the UK's leading outsourcing specialists. Established in 1984, the company now counts both private and public sector businesses among its customers and is perhaps best known for its involvement in London’s congestion charging scheme.

Serco Group 

Global service company Serco manages research laboratories, local education authorities, leisure centres and prisons. Its business also includes the operation of London’s Docklands Light Railway and air traffic control towers in the Middle East and across America.

Carillion 

Provides expertise in commercial and industrial building, refurbishment, civil engineering, road and rail construction and maintenance, mechanical and electrical services, facilities management and PFI Solutions.

Qinetiq

QinetiQ is one of the world's leading defence technology and security companies, manufacturing and supplying products such as sensors for weapons, advanced robotic systems, port security products and advanced security for computer systems.

More to follow.


*Company description from DigitalLook. 

Why dividends should count

While some are arguing that further stock market falls or a bear market lies ahead, a strange thing has been happening on the FTSE in that dividend payments for many companies have been on the rise the last 3-4 years and in a low IR, especially for savings, relatively high inflationary environment, ultimately good solid companies with a reasonable history of rising dividends should be in demand.  If the market falls further, the dividend yield will rise.

For anyone who is a long term buy and hold investor, the ideal scenario is one where over time you get both capital appreciation in a rising share price and a rising dividend payment.  The earlier in terms of their growth that you catch such companies the better.  Robbie Burns, AKA The Naked Trader, often finds future big dividend payers in the smaller company sector, but often the FTSE350 will throw up anomalies in the potential dividend payment of well established stocks especially during times of crisis.

Current FTSE100 dividend yield payers over 5%.

Resolution  9.75%

Aviva  9.32%

RSA  8.60%

BAE Systems  6.44%

AstraZenica  6.43%

National Grid  5.98%

ICAP  5.84%

SSE  5.72%

Sainsbury  5.49%

Vodafone  5.36%

Legal & General  5.15%

British Land Co  5.10%

Marks & Spencer  5.02%

The FTSE100 throws up 16 other companies paying between 4-5%.  In total, 58 companies as of writing have dividend yields in excess of 3%, which beats the best rate of interest you will get for cash on deposit in an online account with a bank, currently around 3% and only a few offer that.

FTSE 250 top 5

Man Group  17.88%

Cable & Wireless Communications  17.36%

First Group  10.86%

Beazley  8.96%

Halfords Group  8.87%

In total, 109 companies pay dividend yields as of today in excess of 3%.

So, if the markets fall further these yields are likely to rise and barring a major world depression or deflation in money printing that results in good companies across the world going under, there is great value to be had, assuming you are prepared to wait, in buying quality as early as possible.

It's not all plain sailing though.  The lists above are full of companies in unloved sectors, like Aviva and Sainsbury, while some have a high dividend yield for the wrong reason, the company is in decline for one reason or another.  Hedge fund Man Group, until recently in the FTSE100 has had its fair share of problems and a share price that has been in freefall for some time, the dividend to some degree has been maintained, but they are unlikely to pay 17%.  A few years ago, HMV was a FTSE250 stock regularly paying a 5-7% dividend, it now languishes as a penny share small cap stock, the capital value wiped out by a decline in its core products.

As always, fundamental research needs to be done in finding the best companies that are likely to not only survive, but also continue to grow both in terms of their share price and dividend.  However, technical analysis can also help in finding these companies.  It is best to start with the monthly chart to see what the long term trend is.  If it is down, as for instance it is right now for Sainsbury, you may want to wait for a sign of an upturn.  I find that the MACD indicator to be one of the better long term trend indicators available.

Data from DigitalLook