HomeInvestingMy favourite FTSE dividend stock just jumped 17%! So why am I...

My favourite FTSE dividend stock just jumped 17%! So why am I sad?

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A FTSE 250 dividend inventory — in all probability my favorite one lately — spiked 17% as we speak (6 February). It was funding belief BBGI International Infrastructure (LSE: BBGI).

Surprisingly, this wasn’t sufficient to prime the mid-cap index gainers, as iron ore pellet producer Ferrexpo surged 21% increased.

Usually I’d be delighted to see this kind of one-day rise from a inventory in my portfolio. And I’m actually not complaining, particularly because it had been drifting considerably aimlessly over the previous yr. But, it’s nonetheless bittersweet…

What occurred

BBGI has agreed to be acquired by Canadian pension fund supervisor British Columbia Funding Administration for £1.06bn. 

Beneath the phrases of this proposed all-cash deal, BBGI shareholders like myself will obtain 147.5p per share. This can be a premium of 21.1% to the closing share value yesterday, and 20.1% greater than the earlier three-month common. 

On the supply, CEO Duncan Ball stated: “Since its launch in 2011, BBGI has grown to change into one of many UK’s largest listed infrastructure funds, with a globally-diversified portfolio of 56 low-risk, core infrastructure belongings that ship sustainable and long-term index-linked money flows. Over this era, we’ve delivered a complete web asset worth [NAV] return of 176.3%.”

The precise return has been much less, thoughts, because the belief has been buying and selling at a double-digit low cost to NAV. Certainly, simply final week (31 January), I wrote: “I feel [BBGI] shares look very engaging at 121p.This leaves them 18.4% beneath the portfolio’s web asset worth (NAV) of 148p, as at 30 June.”

I ended with: “If and when rates of interest transfer decrease, I feel the share value might get better strongly as buyers reassess the high-quality earnings on supply.”

It seems the fund isn’t ready about to search out out — the share value won’t have bounced again — and the board is recommending shareholders vote by way of the deal.

Why am I unhappy?

For me, it’ll deliver this funding firmly again into constructive territory. Certainly, after I issue within the dividends I’ve obtained, the full return will likely be round 10% since I invested just below a yr in the past.

Not unhealthy, however I used to be anticipating much more over time. BBGI’s portfolio is made up of high-quality initiatives like healthcare services, tunnels, and toll bridges. The form of issues that aren’t going anyplace and have a tendency to throw off dependable money to fund dividends.

The ahead dividend yield had crept above 7%, whereas administration was lately boasting that BBGI had one other 15 years of dividend progress left within the tank from its current portfolio. Hey ho.

What is going to I do?

BBGI plans to declare an interim dividend earlier than the deal is accomplished. If I take that, the supply value will likely be diminished by the dividend quantity. The present share value of 143p largely displays this.

I gained’t be hanging round now, although. I’ll promote up and transfer on.

Plenty of worth round

That is the second enterprise in my portfolio within the final couple of months to be acquired at a major premium. Small-cap AI agency Windward rocketed 70% increased within the days main as much as Christmas.

What this proves is that there’s nonetheless a variety of unrealised worth about as we speak in low cost UK shares. I count on much more shareholder worth to be unlocked throughout the FTSE 350 this yr.

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