ONE of my daily monitoring tasks is to look at all the previous day’s Stock Exchange News (Sens), but I don’t always look at the latest news — that is, today’s — before writing my column.
Consequently, as some eagle- eyed readers have told me, my comments have sometimes already been out of date. Significant new investment fundamentals have been reported and sometimes I have egg on my face.
Sometimes, like today, I do review the latest SENS and, less frequently, review it before filing the column or just before I launch it into the ether. (Sometimes, as happened just this week, the column simply vanishes in the ether and I have to relaunch it.)
A more disciplined routine would avoid writing (as I have done in the past) that a company’s earnings could rise when it has already reported, in an unnoticed trading update, that it expects a massive loss.
Before writing today’s column, happenstance took me to the latest SENS when only one item had been published — the annual results for the year ended September 30 of , one of the counters in the Private Investor portfolio. As I write now, six items are on the SENS. One of these is the report of the latest results of Dimension Data ( ).
Didata, I quickly noted, has enjoyed some earnings growth, in contrast to Reunert, whose bottom-line normalised diluted earnings per share were 21% down, to 499,5c, from 630,1c last year.
Reunert’s earnings bottom- line per share were in line with the expected range reported in its trading update published on November 5, and which I mentioned briefly last week. As expected, headline earnings and basic earnings were unchanged year on year. This was because of the noncash mark-to-market profit on the put option Reunert has in respect of its investment in Nokia Siemens Networks .
Accepting that this Nokia Siemens Networks profit has been made on a fair-value snapshot and is, therefore, both ephemeral and volatile, my focus was on bottom-line earnings per share and I reckoned they would be in the middle of the expected fall between 18% and 23%. Therefore, in deciding to accumulate more Reunert shares for Jean’s and my own portfolio, we expected bottom-line earnings per share to be around 500c.
We had also expected that, as the dividends would be reduced proportionately to the lower earnings, the final dividend would be around 200c — a little optimistic, as the actual dividend declaration was 188c.
Reunert is one of the six counters we have selected for our high-income-yielding portfolio, which is still in embryo. It doesn’t quite meet the required criterion on its historic market ratings.
At our share price of R53, its price-earnings ratio is 19,6, its earnings yield is 9,42% and its dividend yield is 4,77%. We took into account, however, that the final dividend of 188c a share will be payable in January. This gives a fillip to the dividend yield, which in any case is only marginally lower than the new portfolio’s criterion.
I have yet to answer two questions: is the Reunert investment in the Private Investor portfolio meeting its long-term core criterion, and will it indeed be a high and growing income yielder?