Here’s to hope, and to my pals who stuck it out

Financial Mail - Investors Monthly - - Editor's Note - MARC HASENFUSS email Marc on hasen­[email protected]­me­

ILIKE MY DIV­I­DENDS . . . prob­a­bly much more than the next in­vestor. I get huge sat­is­fac­tion from see­ing my dis­tri­bu­tions drop through — al­beit these days with 20% lopped off in div­i­dend tax (and a grow­ing fear, not­ing Sars’ col­lec­tions short­fall, that this das­tardly tax may again in­crease in the not-too-dis­tant-fu­ture).

My ploy — on pa­per — is to col­lect dis­tri­bu­tions, and then mo­bilise these cash flows into more ad­ven­tur­ous (non­div­i­dend pay­ing) po­si­tions. In re­al­ity, I tend to just buy more high yield­ing stock.

I might also add how en­vi­ous I am of my friends who stuck it out at con­sumer brands con­glom­er­ate AVI — which showed no signs of be­ing cowed by cur­rent trad­ing con­di­tions when it stuck firmly to its gen­er­ous div­i­dend pol­icy of pay­ing out 80% of earn­ings to share­hold­ers.

One can­not but be im­pressed by un­flap­pable AVI CEO Si­mon Crutch­ley’s ef­forts to bal­ance market share and mar­gin con­sid­er­a­tions as well as grasp oper­a­tional net­tles like fish­ing sub­sidiary I&J and shoe busi­ness Green Cross.

In any event, I did take up a po­si­tion in se­cu­rity prod­ucts spe­cial­ist Trel­li­dor — which is hardly stingy with its pay­out pol­icy. The busi­ness is fairly easy to un­der­stand, and I found some safety in the com­pany’s year-end num­bers (and their ac­qui­si­tion of Taylor Blinds de­liv­ered the goods).

I re­main mor­bidly fas­ci­nated with in­dus­trial ser­vices group How­den Africa. This hugely prof­itable com­pany, which has com­pelling cash flows and a cash pile of around R1.1bn, has not paid a div­i­dend since mid-2013. It is also not buy­ing back its shares or mak­ing ac­qui­si­tions. So why it needs R1.1bn slosh­ing around its bal­ance sheet is any­one’s guess. There was no in­di­ca­tion of an in­terim div­i­dend for the hal­fyear to end-June — but, as ever, I am hope­ful that some­thing will (even­tu­ally) give.

Em­pow­er­ment counter Grand Pa­rade In­vest­ments (GPI) is also one to watch, hav­ing held back a pay­out for the year to end-June. Yes, the rolling out of fast-food in­ter­ests like Burger King, Dunkin’ Donuts and Baskin-Rob­bins is a cap­i­tal-chomp­ing af­fair, and sus­tain­able prof­its may be some way off. But GPI holds a valu­able in­ter­est in the GrandWest casino and a sig­nif­i­cant mi­nor­ity stake in a prof­itable lim­ited pay­out ma­chine ven­ture. If these as­sets are sold, there would be scope for a sub­stan­tial spe­cial div­i­dend, es­pe­cially if Burger King’s cash flows were look­ing richer. GPI has an in­trin­sic net as­set value of nearly 700c/share, so a spe­cial dis­tri­bu­tion may be very re­ward­ing for pa­tient in­vestors.

Be­cause it’s our an­nual Bro­ker of the Year edi­tion. It would be re­miss of me not to thank and con­grat­u­late Stu­art Theobald and his fan­tas­tic team at In­tel­lidex for an­other com­pre­hen­sive, in­sight­ful ex­am­i­na­tion of the lo­cal stock­broking sec­tor. Con­grat­u­la­tions to all the win­ners. I trust read­ers will again find the sur­vey valu­able.

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