Stocks to watch in December
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TUI Travel, the result of a merger between First Choice and the German firm TUI in 2007, is one of Europe's leading tour operators. The company has now climbed out of a loss-making period and profits of £328 million are expected with December's annual bulletin.
The current year is forecast to achieve profits of £366 million. Throughout the loss-making period the dividend record has been progressive and the prospective yield on the shares at 149.3p is an impressive 8.1%.
If the market appears over-cautious in its valuation of TUI that is understandable. Fierce competition persists, consumers across Europe are on the defensive and travel operators have had particular problems with high fuel prices and unrest in North African destinations such as Egypt and Tunisia.
But a recent trading statement indicated management had a grip on these problems. The shares have virtually halved since the early summer and may be due for a bounce back.
Victrex shares have lost nearly a third of their value since they were under this column's spotlight a year ago.
The shares were doing well until the market shake-out began at the end of July. A hi-tech supplier of polymers to the auto, aerospace oil and gas and electronics sectors, the shares were highly rated until fears of recession began to stalk the market.
Thus far profits progress has been good and returns of £93.8 million are expected next month compared with £75 million last time. A touch over £100 million is pencilled in for the current year and the prospective yield on the shares is now over 3%.
Stockbroker Brewin Dolphin's shares were changing hands at 142.5p when we highlighted them a year ago. They subsequently moved up to a peak of 185.4p in the early summer. Not surprisingly the current market malaise has done for their performance and they recently slithered to a low of 113p.
Profits progress is still on the cards, with returns of £42.3 million (£31.4 million in 2010) expected next month. In the current year £50.1 million is forecast, implying a forward yield on the shares of 6.3%.
The troubles of care-home provider Southern Cross has spread contagion to other quoted companies in the sector. AIM-listed CareTech Holdings has certainly not been immune and the shares - 465p a couple of years ago and 328p a year ago - have lately slumped to only 118.75p.
This dire performance is at odds with results which have delivered consistent growth in earnings, dividends and profits over the past five years. Acquisitions in this fragmented market have offset the pressures on local authority budgets.
Profits were £3.3 million in 2006 and hit £7.56 million in 2010. For the year just ended a figure of £15.82 million is forecast. But the market is treating the shares with kid gloves. At this level they sell on under five times prospective earnings and yield 4.52%.
GOOCH & HOUSEGO
Sad to see a Grand Old Duke of York performance by the shares of Gooch & Housego, the optical components outfit with shares at 356p a year ago. They subsequently climbed all the way up to 585p in mid-July and have since come all the way back down again to the 355p level.
If the market starts to bounce back, G & H shares look ripe for recovery. Results due at the end of November should show profits of £10.5 million - more than double the previous year.
In last month's column we focused on two high yielders bringing out results a month earlier: brewer Marston's and the soft drinks supplier Britvic.
This time last year Marston's shares were changing hands at 94.3p. Yield attractions of the shares mean they have held up well despite the market shake-out. The same cannot be said of Britvic - 481.2p a year ago - and lately down to 313p thanks to past heavy losses in Ireland.
This article was written for our sister website, Money Observer.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
A catch-all phrase that can range from assessing the price of a property or vehicle before offering it for sale or the net worth of assets in an investment portfolio to the prices of shares on a stock exchange.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.