One popular share research website that I use likes to label companies displaying attractive value, quality and momentum indicators as super stocks, and right now HICL falls into that category.
There’s a lot to like. For example, with the share price close to 159p, the dividend yield sits close to 5%. Over the past five years, we’ve seen the dividend grow by around 16%, which shows steady if unspectacular progress. But over the same period, the shares have risen about 17%. Combining dividend income with capital appreciation from the rising share price adds up to a reasonable total return for shareholders.
Meanwhile, the forward-looking price-to-earnings ratio sits just below 11 for the trading year to March 2020, and the price-to-tangible-book value is close to one. I don’t believe the company is over-valued by the share price. And I think the infrastructure sector, in general, can be fertile ground for HICL to find cash-generating investments with defensive qualities.
The firm has around 117 investments spread across countries such as the UK, Australia, Canada, France, Ireland and the Netherlands. Investee companies and projects include underlying assets such as schools, hospitals, roads, rail and facilities for the fire and police services.
Nipping and tucking
Today’s results reveal that the firm’s net asset value rose 5% over the period and the directors increased the total dividend for the year by just over 5%. HICL doesn’t just buy and hold investments indefinitely. The company will buy and sell to maximise overall returns and describes making five “value-accretive” investments during the year that were “partially” funded by making two disposals aimed at taking advantage of “favourable market conditions.”
In a snapshot of the kind of activity that goes on in the portfolio, HICL says in the report that £29m of “value enhancements” occurred during the year, including reaching milestones in the construction of the A9 road and Breda Court, which are both in the Netherlands, and Irish Primary Care Centres in the Republic of Ireland.
The company has just switched from being domiciled in Guernsey to the UK. Looking forward, the directors think the firm is “well positioned” to trade through the potential economic effects of Britain’s exit from the European Union because of its “increasingly diversified portfolio, good inflation correlation and relative insensitivity to changes in the UK GDP growth rate.”
On top of that, HICL has a “healthy, diverse” acquisition pipeline and the directors are “confident” about the outlook for the company. I think the infrastructure sector is an attractive place to invest right now and would be inclined to invest in the shares of HICL with an investment horizon of at least five years in mind.
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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.