Yesterday’s newsletter explained that Highcroft’s (LSE:HCFT) net current asset value is 25% above its current market price. This was one factor prompting me to buy its shares at £8.75 (market capitalisation £45m). Today I look at another enticing feature of the company: it’s solid earnings and dividends flow to shareholders over the past decade. This history and the firm’s quality property assets encourages me to think that there is a reasonably high probability that good returns will be made by shareholders in the future.
Key numbers on earnings, dividends and net assets
£m | 2020 | 2019 | 2018 | 2017 | 2016 | |||||
Gross rental income | 6.08 | 5.84 | 5.04 | 4.77 | 3.91 | |||||
Less property operating expense | -0.62 | -0.18 | -0.18 | -0.26 | -0.20 | |||||
Net rental income | 5.46 | 5.66 | 4.86 | 4.51 | 3.71 | |||||
Net gain on disposals | 0.97 | 0.13 | ||||||||
Net valuation gain | -4.65 | -2.89 | 0.48 | 3.29 | 0.97 | |||||
Investment income | 0.06 | -0.06 | 0.23 | 0.63 | ||||||
Less administrative expenses | -1.07 | -0.83 | -0.74 | -0.66 | -0.65 | |||||
Net operating profit | -0.26 | 2.00 | 5.51 | 7.36 | 4.80 | |||||
Net finance expense | -0.90 | -0.85 | -0.70 | -0.65 | -0.50 | |||||
Tax refunds | 0 | 0.01 | 0.12 | 0.12 | 0.04 | |||||
Profit after tax | -1.15 | 1.15 | 4.93 | 6.84 | 4.34 | |||||
EPS statutory | -22.2p | 22.3p | 95.3p | 132.3p | 84p | |||||
EPS with valuation gains/losses removed | 67.7p | 78.5p | 87.3p | 64.8p | 55.7p | |||||
Dividend | 57p | 48p | 52.5p | 46.25p | 41p | |||||
Net asset value per share | £11.04 | £11.75 | £12.07 | £11.61 | £10.71 |
£m | 2015 | 2014 | 2013 | 2012 | 2011 | |||||
Gross rental income | 3.44 | 3.08 | 2.73 | 2.35 | 2.13 | |||||
Less property operating expense | -0.33 | -0.16 | -0.15 | -0.18 | -0.30 | |||||
Net rental income | 3.11 | 2.92 | 2.58 | 2.17 | 1.83 | |||||
Net gain on disposals | 0.42 | 0.94 | 0.42 | 1.55 | 0.28 | |||||
Net valuation gain | 4.77 | 3.64 | 1.24 | -0.59 | -0.27 | |||||
Investment income | -0.23 | 0.06 | 1.00 | 0.75 | 0.07 | |||||
Less administrative expenses | -0.53 | -0.43 | -0.35 | -0.31 | -0.34 | |||||
Net operating profit | 7.52 | 7.12 | 4.90 | 3.57 | 1.57 | |||||
Net finance expense | -0.36 | -0.17 | -0.05 | -0.01 | -0.02 | |||||
Tax credit | 0.07 | 0.10 | 0.01 | 0.02 | 0.14 | |||||
Profit after tax | 7.24 | 7.06 | 4.86 | 3.59 | 1.72 | |||||
EPS statutory | 140p | 136.5p | 94p | 69.6p | 33.4p | |||||
EPS with valuation gains/losses removed | 55.6p | 72.7p | 56.5p | 72p | 40.1p | |||||
Dividend | 38.8p | 36p | 33.75p | 31.8p | 30p | |||||
Net asset value per share | £10.26 | £9.23 | £8.21 | £7.59 | £7.20 |
Dividends per share over the ten years total £4.15 – a large payout on a share trading at £8.75. And yet in the same period the directors have grown net rental income by an average of 12.9% per year (from £1.83m to £5.46m) and net asset value by 4.9% per year (from £7.20 to £11.04).
So, it seems that a good dividend yield (currently 6.5%) can be accompanied by a growth in regular profits from income producing properties and growth in the asset base.
The earnings per share measure excluding gains/losses in property values rose from 40.1p to 67.7p, an average
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