A Friday Miscellany - Banks, T-shirts, savings, flying and a lump of cheese.

Friday strays: Going back to last Friday, Royal Bank of Scotland issued its third quarter statement. The bank listed just under 30% of Citizens Financial Group in the US during the quarter. Generally RBS is showing improving results, with the core tier 1 up to 10.8%, as against the start of the year’s 8.6%. Guidance for the year was unchanged from the recent trading statement. The Tangible Net Asset Value is 388p up from 376p at the start of the year and broadly in line with the current share price. With no dividend until FY 2015 expected by markets income investors have time on their side.

Next up is HSBC’s third quarter update, which was ahead of most expectations on an underlying basis, but featured several hits from fines and provisions (FX, PPI etc.). The core tier 1 edged up to 11.4%. The third quarter dividend was maintained at 10c, with analysts looking for around 53c for the year, against 49c last time. The shares continue to languish around 635p, but this is a 5.3% yield, with upside and the stock still looks like decent baseload for income investors.

Remember that Associated British Foods is the main Weston family business with a quoted minority. It is a food manufacturer whose best bit is actually a retailer, Primark. The PE is in the mid 20’s despite including commodity earnings. The yield, on a 6.3% dividend increase, is still under 1.5%. It looks too expensive to interest me, but that has not stopped it being a good investment.

Legal & General has been a good friend to income investors in recent years as Nigel Wilson has turned on the cash generators. The third quarter IMS showed annuity sales up 16% as bulk sales compensated for the Government’s shredding of the personal annuity market. Asset Under Management at LGIM were up 14% at £676bn. Operating cash was up 8% and net cash 12%. At 239p the shares are no longer bargain basement, but on around 16.5p of eps the PE is 14.5x (and PE is relevant given the big changes in the P&L over recent years). The shares do trade at around a 40% premium to embedded value, but that doesn’t pick up any value for LGIM, which could be worth 25p-30p. A putative 10% dividend increase to 11.1p this year means a nice yield of 4.6%, probably rising to over 5% in 2015. Still a share to run with.

I wrote somewhat lukewarmly about John Menzies in late August, when it was clear that the aviation division was having a transitional year. Now, with a new CEO, Jeremy Stafford, in place there has been a profits warning with the aviation side seeing ongoing tough trading. The head of the aviation division has left, with a one way ticket and no duty free. I see one broker is now pencilling in flat eps of 50p for this year and next. This would still leave the pre-warning forecast dividend of 27.5p almost twice covered and a handsome yield of 8.2% at 335p. However with such negative momentum and the new CEO to conduct a strategic review, angels may fear to tread here for a while.

Dairy Crest have sold their dairy business to Muller for £80m (subject to competition clearance) in a well received deal, leaving them to concentrate on cheeses and spreads. The proceeds will be used to reduce debt initially. At the same time interim results saw the dividend increased by 2%, putting the shares (which are up sharply) on a now more secure yield of 4.5% at 477p. So still a low growth company and not that exciting, but this is re-assuring to those who hold them.(Neil Cumming, 7^th November 2014)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about.

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