Company results and dividends

February 11, 2013

During the last few months, some of the companies we report on have seen their share prices exceeding substantially their dividend rises. In many cases dividend yields have fallen considerably.

Buying dividend paying shares when they are priced too high will often lead to long-term disappointing returns. Instead, buy and sell high quality dividend paying shares at the right moment. When they are either historically undervalued or historically undervalued.

Our unique share valuation service provides you with information on the share prices at which many dividend paying companies are historically undervalued and overvalued.

In the meantime, here are some companies whom have reported recent results and dividends, including:


AstraZeneca released its annual results to 31 December. Due to the loss of patent exclusivity on several drug brands, government measures to curb healthcare spending and tough conditions generally in the pharmaceutical industry annual sales were down 17 percent to $28bn.

The group is increasingly focused on emerging markets. Revenues in the Emerging Markets rose by 6 percent in the fourth quarter, with good growth in China, Saudi Arabia and Russia highlighted.

The final dividend will be 120.5 pence going ex-dividend on 13 February and payable on 18 March. This brings the full financial year dividend to 178.6 pence, against 175.5p last year, up by a below inflation 1.8 percent.

AstraZeneca held net cash of $2.8bn at the end of 2011 but by the end of 2012 this has become net debt of $1.4bn, part due to spending $2.2bn in share buyback, with gearing now at 6 percent. At least, AZN’s share buyback programme has been suspended following the arrival of new CEO Pascal Soriot.

Accompanying management financial forecasts for the current 2013 financial year provide little comfort. The board expects a mid-to-high single digit percentage decline in revenue as patent expiries continued to erode business.

Due to the lack of clarity on the groups’ challenges as patents expire, analysts expect earnings to fall further with no improvement in the dividend for 2013/14.


In comparison to AstraZeneca, GSK’s full year sales across the group declined only by 1 percent to £26.4 billion, as growing consumer healthcare sales helped to counterbalance a 2 percent decline in pharmaceutical and vaccine sales. Total sales to the Emerging Markets grew by 10 percent over the year, and now account for 26 percent of overall group sales. This helped to offset declining sales in both the USA and Europe.

The final dividend will be 22 pence going ex-dividend on 20 February and payable on 11 April. This brings the full financial year dividend to 74 pence – an inflation beating increase of nearly 6 percent.

During the year, the group repurchased 174.5 million of its own shares (wasting almost £2.5bn). Based on current market conditions, management is targeting share repurchases of £1-2 billion in 2013, while analysts expect further dividend increases.

This year GSK is aiming for sales growth on six potentially significant drugs, which have completed testing and been filed to European and American regulators for approval.

The group’s portfolio of activities continued to be adjusted, with both acquisitions and disposals being made, efficiency and cost saving initiatives pursued, whilst products such as its Lucozade and Ribena brands are to be assessed for further growth potential.

Last week, GSK announced the acquisition of a further stake in its publicly-listed Indian consumer healthcare subsidiary to 72.5 percent from 43.2 percent, deepening its footprint in emerging markets and non-prescription products.


The world’s largest spirit company, Diageo reported steady sales growth of 5 percent to £6.04 billion in the last six months of 2012. The interim dividend, up an inflation beating 9 percent, will be 18.1p going ex-dividend on 27 February and is payable on 8 April.

Faster growing markets accounted for 42 percent of Diageo’s net sales in the second half of 2012 and delivered organic net sales growth of 14% and operating profit growth of 21%. European sales, which make up about 28 percent of Diageo’s total, fell by 2 percent as fast-growing Turkey, Russia and Eastern Europe helped compensate for a fall of 19 percent in southern Europe.

Free cash flow improved somewhat with a reduction in still massive gearing to 125 percent from 136 percent at the year end of 30 June 2012. The 2013 dividend forecast is 46.8 pence for a below inflation dividend yield of 3 percent.


Emerging markets managed like-for-like sales growth of 10.8 percent, helping Unilever to propel full-year sales to 31 December over the €50bn (£42bn) level for the first time ever. Of this growth, 2.9 percentage points came from price rises, with 4.8 percent from volume growth. The profit margin also rose by 30 basis points to 13.8 percent. These days, emerging markets make up 55 percent of Unilever sales.

Free cash flow increased to €4.3bn from €3.1bn in 2011. This is mainly due to higher operating profit and an improved performance in working capital. Net debt also fell to €7.4bn from €8.8bn over the year.

The company announced a final quarter dividend of 20.39 pence which went ex-dividend on 6 February and will be paid on 13 March. This brings the full financial year dividend to 78.8 pence, compared to 2011’s 77.61 pence – a below inflation rise of 1.6 percent due to the weakness of the Euro over the period.

With 2013 dividend forecasted in Pound Sterling at around 86 pence, some analysts expect Unilever to raise its dividend in the mid-single digits annually, during the next five years, while also repurchasing about 2 percent of shares outstanding each year.

National Grid

National Grid issued a management statement covering 01 October 2012 to 28 January 2013. In spite of the impact of hurricane Sandy on its US business, and despite some analysts arguing to the contrary that the costs of dealing with disruption caused could run to hundreds of millions of pounds, National Grid confirmed that it is on track to deliver improved turnover and profits.

Consensus forecasts for the year to March 31 point to National Grid edging up pre-tax profits from £2.7bn to £2.8bn on turnover above £14bn.

National Grid raised its dividend 8 per cent to 39.28p last year and predicted it would deliver a 4 per cent improvement this year, based on a one-year rollover of UK transmission price controls and a 3 per cent prediction for inflation. The new dividend policy for the period from April 2013 will be announced by the time of the full year figures in May.

Uncertainties over the impact of new regulatory agreements has prompted speculation that National Grid will be forced to trim back on its dividend policy for the next eight years. With some analysts fearing a dividend cut next year and/or a further capital raise.


SSE announced a nine month trading update. The group reported an adjusted profit before tax of £1,336m for 2012, suggesting the figure for 2013 could be almost £1,4bn.

The group is set to lift its payout for the fourteenth year running after the company predicted its full-year dividend would be around 84 pence per share – 4.5 percent higher than the 80.1 pence per share declared for 2012.

Disconcerting is that SSE’s operating cash flow, which for the year ending March 2012 was negative, was assisted by the company having to borrow £1 billion to fund the dividend, which in my mind raises a question about its sustainability. Red flag in my view.

It was also announced that its CEO Ian Marchant would step down in July after a decade at the helm, who commented that “SSE’s balanced model of market-based and economically-regulated businesses and strategy of focusing on operations and investments in these businesses is again proving to be robust. The overall performance of the company has been good in 2012/13.”

Uncertainty galore?

Are any of the above companies currently historically overvalued?

Buying dividend paying shares when they are priced too high will often lead to long-term disappointing returns.

Our unique share valuation service provides you with information the share prices at which many dividend paying companies are historically undervalued and overvalued. Our proprietary financial strength database provides you with information whether these companies can sustain and increase their dividend payments.

Find out whether any of the companies mentioned above are currently historically undervalued, overvalued or trading somewhere in-between’.

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