Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Why You Shouldn’t Get Excited About Gold Price Mini-Rally - 26th Jan 21
The Truth About Personal Savings Everybody Should Know and Think About - 26th Jan 21
4 Economic Challenges for 2021 - 26th Jan 21
Scan Computers 2021 "Awaiting Picking" - 5950x RTX 3080 Custom PC Build Stock Status - 26th Jan 21
The End of the World History Stock Market Chart : Big Pattern = Big Move - 26th Jan 21
Stock Market Recent Sector Triggers Suggest Stocks May Enter Rally Phase - 26th Jan 21
3 Top-Performing Tech Stocks for 2021 - 26th Jan 21
5 Tips to Manage Your Debt - 26th Jan 21
Stock Market Intermediate Trend Intact - 25th Jan 21
Precious Metals Could Decline Before their Next Attempt to Rally - 25th Jan 21
Great Ways of Choosing Good CMMS Software for a Business - 25th Jan 21
The Dark Forces behind American Insurrectionists - 25th Jan 21
Economic Stimulus Doesn’t Always Stimulate – Pushing On A String - 25th Jan 21
Can Karcher K7 Pressure Washer Clean a Weed Infested Driveway? Extreme Power Test - 25th Jan 21
Lockdown Sea Shanty Craze - "Drunken Sailor" on the Pirate Falls Crazy Boat Ride - 25th Jan 21
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Double-Digit Yields from Stocks Around the World

Companies / Investing 2016 May 16, 2016 - 04:54 PM GMT

By: The_Gold_Report

Companies

In this bulletin, Adrian Day reviews three companies with strong yields. All three are under some pressure, but equally all are solid companies with very attractive yields.

Ares Capital Corp. (ARCC:NASDAQ) (15.11, 10.1%) is a solid company, the largest of the dividend-paying BDCs. There have been some positive developments in the latest quarter: the Net Asset Value increased, modestly, again; there was improvement in the credit profile of its holdings; and it repurchased $5.5 million of its shares (though earlier in the quarter at lower prices).


The company continues to face headwinds, however. There is less deal activity in its segment throughout the industry, based on general credit and rate concerns. For Ares, its liquidity is fairly tight, meaning it will have to undertake some exits before doing significant new purchases. And its earnings fell shy, though just by 1 c, of its dividend. We should note though that Ares with 75% of its dividend covered by recurring income, has a good coverage profile.

The exit of GE Capital remains a burden

The major headwind however is the switchover from the wind-down of its old joint venture with GE Capital (which exited the credit business) to the new venture with an AIG affiliate. The latter is in the ramp-up stage with a long way to go to fully replace the GE venture. And in the short term, it could get worse; as Ares moves investments from its books to the joint venture, there will be an immediate decline in its earnings. However, this will free up cash on Ares' balance sheet and, over the longer term, leverage Ares' earnings power.

We are definitely holding Ares, and have no problem with new investors buying; again, it's top of its class and sports a very high yield. We are experiencing a period of undervaluation because of the GE Capital saga. However, we are not necessarily looking for any immediate appreciation, and could see weaker prices in the months ahead, so we would not add to positions right now.

Oil investments reduce NAV again

Gladstone Capital Corp. (GLAD:NASDAQ) (7.17, 11.7%) operates in a lower end of the market than Ares. It has stepped up investment over recent months, and has firepower to do new deals. Its pipeline has increased in recent months. Its Net Investment Income is covering the dividend.

The negatives for Gladstone recently have been another decline in the Net Asset Value, from both realized and unrealized losses. Its energy investments, representing about 16% of its portfolio, contributed to those losses, though, as we have mentioned before, these are three service companies, not directly related to the oil price, and all remain profitable.

I suspect the market wants to see several quarters of consistent dividend coverage, and new investments will help. Again, we are definitely holding and it's a buy for new investors, though we could see lower prices in the weeks ahead.

Dividend safe for now, but debt reduction ahead

Hutchison Port Holdings Trust (HPHT:Singapore) (US$0.425; 11.3%) is operating in a difficult environment right now. There is pressure on volumes, with exports from China generally soft, particularly to Europe, while the decline in the value of the renminbi has reduced revenue. Half of its contracts are up for renewal this year. While negotiations are still underway, the new tariffs will be backdated to the start of the year. In the current trade environment, there is likely to be some reductions in rates.

Looking ahead, Hutchison sees some pick up in volumes to the U.S., though remains cautious on Europe. It recently bought a major interest in an Egyptian port operator. Whether this is a strategic move to diversify or was purely opportunistic remains to be seen.

Hutchison has however taken a strategic decision to reduce leverage, aiming to cut debt by HK$1 billion per year for each of the five years beginning next year. This program will commence next year; this year's distribution is not affected.

At the current stock price—down from 50 cents two weeks ago—the yield is over 11%.

While we are cautious on global trade, and believe the company may need to reduce its dividend next year, we would continue to hold Hutchison, a well-run company, as part of a global income portfolio.

Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is "Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks."

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosure:
1) The following companies mentioned in the article are sponsors/billboard advertisers/special situations clients of Streetwise Reports: Gladstone Capital. The companies mentioned in this article were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
2) Adrian Day: I or my family own shares of the following companies mentioned in this article: Ares Capital Corp., Gladstone Capital Corp. My company has a financial relationship with the following companies mentioned in this article: None. Clients of Adrian Day Asset Management hold shares of the following companies mentioned in this article: Ares Capital Corp., Gladstone Capital Corp., Hutchison Port Holdings Trust. I determined which companies would be included in this article based on my research and understanding of the sector. Statements and opinions expressed are the opinions of Adrian Day and not of Streetwise Reports or its officers. Adrian Day is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation or editing so the author could speak independently about the sector. Adrian Day was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
3) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules