Save me before the man in the white coat comes and gets me - I've developed a morbid fascination with these quasi bond type high yielding stocks like GNE.
You're not alone lol
I dont know what it all means but my database throws up this -
- The GNE dividend yield (net) over the last few years has generally been around 4.7% more than the 10 year Govt bond rate (Currently 5.3% but reverting to that average from a brief spike in March 2020). I suppose this spread a measure of the risk holding GNE? Reversion to average suggests more short term upside
- so not surprisingly the GNE dividend yield has fallen in line with declining interest rates Agree, no surprises there
- The GNE yield was over 8% in 2015 and has been trending down since
- We should not overlook that as interest rates fall so does expected overall total returns from equities - we are happy getting less because less is better than almost nothing Agree 100%
- The 10 year govt bond rate is now zero (or nearly there) Was just on 0.5% this week)
- Does this mean the historical spread of 4.7% noted above will shrink further? Would this imply that yield seekers are prepared to take on 'added risk'? Yes, the search for yield is getting really desperate. Its funny how being offered just ~ 1% on term deposit has a way of sharpening one's focus ! Its all about TRINA
- How low can the GNE dividend yield go - after all it's been trending down for years. 5% gross yield in my opinion, currently 6.8% gross which implies significant upside.
- What impact does this have on the GNE share price in the future - bearing in mind it is basically the face value of a quasi bond. Plenty of upside to come in my opinion, it was in the $3.70's last year when interest rates were substantially higher. Contact probably going into the MSCI index could see that significantly rerated and then we might see some people switching into GNE for its better yield...kind of like switching power companies for cheaper electricity in reverse :)
Conclusion I've come to is that one needs to act early (like soon) if they want to get current yields -- TRINA or is TINA will have a field day in case of FOMO.
This is why dividend yield stocks have been performing very strongly in recent weeks on the NZX...and I am very confident we are not done yet by any means
But then again one needs to consider where the share price (capital) might be in a year or two.
The company's own forecast is for EBITDA to grow nicely this year to over $400m.
I have seen a summary of a broker forecast with EBITDA growing to just over $450m a few years hence and dividends growing to 18 cps so any valuation needs to embrace the long term trend of the company steadily increasing its dividend payout
And I've done all this without even really looking at how Genesis makes money - all I see is that their preferred measure of profitability EBITDAF trend doesn't look too flash - the financial performance doesn't seem to be the driver of the GNE share price, its that divie yield.
It looks sound from where I see it. Long term Huntley will be replaced with wind
Even though i've got this quasi bond as a substitute for a 3 year year term deposit i don't actually see myself lasting the 3 years - i expect (and hope) that I'll have to take/lock in some capital gains
I see no reason to think about selling but who knows what the future holds eh, I said the same thing about the Warehouse last week lol
Must go now - i hear the man in the white coat coming up the front steps