Brunner – 46 years of dividend growth

Brunner – 46 years of dividend growth. Brunner has announced its final Results for the year ended 30 November 2017. Its NAV total return was 19.5%, which is ahead of its composite benchmark index’s return of 15.1%. In terms of specific drivers of performance, the extract from the annual report released this morning does not include any commentary on this or the investment manager’s review, so we are unable to comment on this here. However, the chairman, Carolan Dobson, says that strong underlying dividend growth from the portfolio contributed to an increased level of income and earnings, while the first half of the financial year saw a much lower level of sterling when compared to the first half of the previous year, resulting in higher overseas dividends when translated back into sterling. The result is that earnings per share rose by 12.2%, year on year, from 16.4p to 18.4p.

One expensive debenture matures; the board is looking at options to refinance another

Brunner had two long-term debentures. These were both taken out many years ago when interest rates were much higher and have proved to be costly in recent years.

The first debenture matured in January 2018 and was redeemed this with the company’s cash reserves. The second debenture does not mature until 2023. The board says it has looked closely at various options to repay or refinance this loan. There would be an upfront cost in doing so, but the board says that it believes that company would benefit, over the long term, from a much reduced interest cost and improved earnings profile. The board says that it believes that these benefits outweigh the costs and therefore intends to progress this matter further over the coming months.

Brunner – 46 years of dividend growth

The board is proposing that a fourth and final dividend of 6.00p per share will be paid on 30 March, bringing the total payment for 2017 to 16.5p, an increase of 4.4% on last year. If the dividend is approved, it will mark the 46th year of successive dividend increases.

This dividend payment is covered by earnings per share of 18.4p, which the board says has allowed a further increase in the company’s revenue reserves to 25.4p per share (after the payment of third quarterly and proposed final dividends).

The board says that, not paying the high cost of the debenture that matured in January 2018 for the forthcoming year will benefit earnings per share. Interest savings are £2.04 million per annum and the board intends to reflect this and the strong growth in dividends in the underlying portfolio in dividend payments going forward.

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