Where is this Christmas rally?!
I mean, the FTSE dropping below 6,500 the other day was not in my party plan.
It seems the index can’t even manage to return to October’s 6,800 – let alone get anywhere close to 7,000 and beyond.
Not even the pointy-heads at Goldman Sachs, now predicting 7,500 for the end of 2014…
…or the Investors Chronicle, recently cheer-leading Christmas rallies in 27 of the last 33 Decembers…
…have encouraged buyers to round off this vintage year for shares with a festive frolick.
(And Mark Scrooge-Rogers did not help matters in his Collective on Friday).
Still, the silver lining is that many shares are cheaper now than they were a few weeks ago.
And who doesn’t like to snap up a bargain or two, especially in time for Christmas?
Speaking of bargains…
…I see Royal Mail shares have been on the move.
It wasn’t hard to spot Royal Mail’s value – the big clue was in the dividend
Described by yours truly at the flotation two months ago as…
…“quite possibly the best large-cap buying opportunity of the year”…
…Royal Mail’s shares have since soared by up to 80%.
I must admit, it wasn’t hard to spot Royal Mail’s value at the 330p float price.
I for one had foreseen possible large gains.
What’s more, several novice investors in the Fool office had worked out the potential.
Heck, even the doomsters at MoneyWeek had managed to see some upside.
The big clue was in the dividend.
The postal service signalled it would pay out £200m a year, which equated to a lovely 6% income for anyone getting in at the float.
As you may recall, I was too greedy with my £10,000-plus application, so I did not receive any shares :-(
(That still rankles me today).
There are still opportunities to bag high yields from other flotations
These days Royal Mail’s shares offer a yield of 3.4% – about the same as the wider market.
So not exactly a dreadful income, but not exactly super-juicy either.
Nonetheless, there are other new flotations about that can allow you to bag a much higher yield.
In fact, I’ve located five names that you may wish to put on your watch list for further research.
But before I go on, I will make three important points.
1) I’m saying ‘put on your watch list’, as I’ve not done any in-depth studies on this quintet.
2) All the yields I’ve calculated below are based on public dividend projections made by the companies themselves.
(So I have not relied on estimates from City brokers.)
3) Companies rarely have the confidence to publicly project their future dividends.
(Because the directors will look like total bozos if things go wrong.)
On that third point, the five companies do seem very sure of their immediate prospects.
So on that basis alone I reckon all five are worthy of further research.
Anyway, here are the five names:
Idea 1: Infinis Energy
First up is Infinis Energy, which joined the market last month and claims to generate 7% of the country’s renewable power. Assets include 121 landfill gas sites and 16 wind farms.
These shares have been marooned around their 260p flotation price, giving a market cap of £780m.
In the group’s flotation document, a £55m annual dividend – about 18.3p per share – was projected.
And if that sum is paid, buyers at 260p would receive a 7% income.
Idea 2: Greencoat UK Wind
Keeping to renewable energy, Greencoat UK Wind seems to offer a near-6% income.
This investment group joined the market in March and has since invested in ten UK wind farms.
The price has raced from 100p all the way to 104p, supporting a £400m or so market cap (assuming a recent fund raising is completed).
Greencoat plans to pay a 6p per share annual dividend that rises with RPI inflation.
Idea 3: Target Healthcare
Moving to property now and to Target Healthcare, which is a £100m real estate investment trust that buys care homes.
These shares began life in March at 100p and have been another slow burner, surging to the giddy heights of 104p.
This is the only share of today’s five that pays quarterly dividends, with the amount proposed by Target being 1.5p per share every three months until at least June next year.
The 6p per share annualised payout gives another near-6% income.
Idea 4: esure
Now to insurance, and proof that flotations are not always success stories.
esure floated at 290p in the spring and now trades at 250p after its results owned up to slowing second-half growth.
The same results showed a 2.5p interim dividend that I believe underpins a payout of 15p per share for the next full year.
A 15p payout on 250p gives 6%.
I should add that my 15p calculation includes special dividends, which esure suggests are likely to occur on a regular basis. The market cap here is a meaty £1bn.
Idea 5: Conviviality Retail
Finally there is Conviviality Retail, which operates or franchises 600-plus off-licences under the Bargain Booze brand.
The basic story here is the AIM-traded shares have fizzed from 100p to 160p since July on the back of a proposed 8p per share annual dividend.
The group’s market cap is £107m and supports a 5% income for today’s buyers.
These particular payouts may be more reliable than other super incomes
So there you go, five recent flotations with publicly declared plans to pay high dividends.
Whether they can do as well as the shares of Royal Mail, I don’t know.
But as I say, few companies publicly issue dividend forecasts for fear of things going wrong…
…which suggests these particular payouts may be more reliable than other super incomes.
Anyway, please do your own further research and good luck if you do decide to take a flutter.
> Maynard does not own any share mentioned in this article.