Some will actually listen to an ex-banker, others will not. Whoever wins have bragging rights which they will surely exercise when it suits them. Thanks for sharing.
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It's an earnings growth story Snoopy. Sooner or later it'll hit $1.83 with organic earnings growth. With a circa 7% gross dividend yield I am happy to take a patient approach now that dairy has recovered. You can't completely discount the possibility of a credit rating upgrade at some stage either which might lower the cost of their funding somewhat.
An awful lot of quality stocks on the NZX are currently trading within a yard or two of a fairly fulsome price...might as well own the ones that pay a decent dividend yield then :)
Spoken as though the core position is solid and incremental growth is a given. I think incremental growth is a given (switched on management look to have a credible growth strategy). But I am not so sure how solid that core of earnings really is.
Heartland keep booking profits on their dairy loans, but has dairy really recovered? Agricultural loans were $628.202m at last full year balance date (30-06-2016) and six months later 31-12-2016) had grown to $712.072m, a rise of 10.4% in just six months. How much interest was actually repaid over that period and how much was capitalised and booked as profit?Quote:
With a circa 7% gross dividend yield I am happy to take a patient approach now that dairy has recovered.
From the HY2017 interim report
"Trading conditions for Heartland’s dairy customers improved over the course of the reporting period, with farmers enjoying increases in payments from dairy companies. Dairy customers have generally responded (but with some exceptions? Snoopy edit) well to the difficult trading conditions over the past two years, with most customers managing to significantly lower their operating costs, and where necessary, to consolidate their financial position."
That last bit in bold reads like the bank has taken out their whip.
Yes a credit rating upgrade wouldn't surprise me, particularly when Heartlands own ABCP Trust is already on an A+ rating. And yes the dividend while it lasts will support the share price. As I said in another post" the risk profile gross return you are a shareholder might expect, will determine the share price you are prepared to pay.Quote:
You can't completely discount the possibility of a credit rating upgrade at some stage either which might lower the cost of their funding somewhat.
An awful lot of quality stocks on the NZX are currently trading within a yard or two of a fairly fulsome price...might as well own the ones that pay a decent dividend yield then
SNOOPY
Heartland is not shy about raising new capital. Subsequent to EOHY2017 they have raised a lot more new capital with an issue of $20m in new shares in New Zealand and the issue of $A20m of capital notes in Australia. But leading up to the latest reporting point, it is apparent that the balance sheet is already being worked harder. The following information is taken from IFR2017 and AR2016.
Snapshot Time Shareholder Equity {A} Finance Receivables {B} {A}/{B} EOFY2015 $480.125m $2,862.070m 16.8% EOHY2016 $485.688m $2,928.621m 16.4% EOFY2016 $498.341m $3,113.957m 16.0% EOHY2017 $528.002m $3,334.800m 15.8%
IFR2017 contained the following guidance on future capital use:
"Moving forward Heartland intends to take a more dynamic approach to capital management, in the same way that the larger banks operate, holding a more efficient level of capital and approaching the market to access capital through multiple issuances that are timed and sized to meet its capital needs."
Looks like lots of opportunities to buy discounted shares and/or bonds will be available to shareholders in the future. That should be enough warning for any shareholder today to wait for some of those new cheaper shares if they wish to increase their holding, rather than pay 'top dollar' on the market.
SNOOPY
No reason I can see why the dividend story shouldn't continue. Just keep tapping keen new investors for fresh capital Tier 1 and Tier 2 to fund organic growth and pay out about 70% of net profit as fully imputed dividends. I can't see any issue with the continuity of that. Everyone loves a good growth story.
From IFR2017
One last word on liquidity. The 'sideways solution' of having more capital is one way to fix a liquidity problem. However in the case of Heartland, having more capital does not appear to be a fix.
Heartland are using their new capital for growth, rather than improving liquidity. So here is an instance of 'new capital' actually increasing the company risk.
SNOOPY
Make that $148 paid in by stakeholders for every $141 paid out to shareholders (if you go by the historical record so far). Even 100% 'Retained earnings' it would seem is not enough in the case of Heartland.
Heartland, NZ's first cash flow negative bank? Perhaps it would have been sustainable if no dividends had ever been paid?
SNOOPY
You're over-thinking it. Current year EPS is forecast at 12 cps. Current year dividends are forecast at ~ 8.5 cps :sleep: