Fund manager

Finweek English Edition - - FUND IN FOCUS - Mills ex­pands how

the fo­cus on div­i­dends af­fects in­vest­ment de­ci­sions. “One of the first shares we put in the port­fo­lio was African Bank. It had a div­i­dend yield at the time of 8%. But we got wind that things were go­ing badly, so we sold the en­tire stake be­cause we thought the div­i­dend was un­der threat. The same ap­plied to Sa­sol at the end of last year − it was one of the fund’s largest hold­ings. So we got out be­cause based on where the oil price is at the mo­ment, we don’t think they will be able to con­tinue pay­ing div­i­dends.”

The fund has also found plenty of hand­some div­i­dend pay­ers out­side of the large multi­na­tion­als. AVI, for in­stance, was bought by the fund when it was R40- odd a share. “To­day, it ’s trad­ing at R85/share. So, will we buy more? No. Sell? No. It has got ex­pen­sive, but we be­lieve the div­i­dends will re­main in­tact over the next few years, and we will only sell when the div­i­dend is un­der threat.”

An­other small cap, Spur, also oc­cu­pies a l arge po­si­tion i n the port­fo­lio. “I was taken aback by the amount of cash flow it gen­er­ates and its re­turn on cap­i­tal em­ployed,” says Mills. “We started build­ing a stake at R30/share, now it ’s R39/share. If oil stays where it is, the mar­ginal rand saved on fuel will be good for the con­sumer, and Spur will be the ben­e­fi­ciary of that.”

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