Contact Energy - CEN Chart

[Snoopy]

When going through my 'Contact' folder today I came across an extraordinary fact. I had thought of my self as a 'buy and hold' investor as regards Contact. It would be more truthful to say I am a 'buy and buy' investor. Incredibly I have now bought into Contact on 18 separate occasions and never sold any! Granted many of those buys were for very modest amounts when I was participating in the dividend reinvestment plan. So I am not quite the gazillionaire you might think. But it is an extraordinary record for me nevertheless.

The main objective of the trader as I understand it, is to sell out at a profit. By contrast the main objective of an investor like me is to gain the lowest possible average entry price. For someone like me, that means I have no plan to ever sell out of CEN completely. So the idea of a particular share purcahse having a 'beginning' and an 'end' ceases to have meaning. As long as the good dividend flow remains I will ride the ups and downs. If along the way my share starts to look cheap I will buy some more to lower my average entry price. By contrast, if the price goes up above what I deem fair value, I may look at selling a few to lower my average entry price (hasn't happened yet!).

It is true that in theory I could have sold all of my CEN shares back in May 2011 at $5.84 equivalent. But as a long term investor I would never have done that. As it happens my average purchase price today is $4.82, and back then it was even less. As I did not judge $5.84 to be overpriced at the time, there was no reason for me to sell at the time. As you can see my current CEN fair valuation is $5.87. So I am very comfortable with not selling at $5.84, even all these years later.

Fixing on a particular price on a particular date is to me not significant. Sure people remember their first buy in price and some, like me, keep a record of their average buy in price. But when you have bought into a share eighteen times, a particular partial purchase at $5.84 (nominal) on a particular day ceases to have any relevance. Of course from a traders perspective I fully understand that they may have a different view!

SNOOPY

[sb9]

Thanks for your input Snoopy, well summed up.

The ASX listing shouldn't be too far way I think. They said 4 to 6 weeks at the time of Origin sell down, which was a month back...so should be getting pretty close.

[Snoopy]

My fifteen years with the company have had their (relative) highs and lows. Although I have been with Contact for 15 years, half of my purchases (in terms of the total number of shares bought) were over the last four and one quater years. IOW my median purchase timing was back in May 2011. So how have I done? A quick look at the historical chart would show that I made my time based theortical equivalent single purchase (median purchase) when the share price was at $5.92. The current share price is $5.11 - not good! But is this really a good measure of how I have done? Let's see.

Following my 'median' purchase of shares, I banked three more dividends through the dividend reinvestment plan. I did this at the time because I wanted to increase my CEN holding, but also for 'tax reasons'. I was able to get my DRP dividends completely tax free. Looking back this wan't a smart move overall. Invariably once my DRP shares came to me, the market share price had already declined below the price my new shares were issued at! I made a note to myself not to do stuff for tax reasons again! I suppose I will though, because I always fall for that! The IRD decided this Contact DRP was a rort as set up, so cash dividends soon resumed.

Here is the dividend stream I got:

11cps, 14cps, 11cps, 15cps, 11cps, 50cps (special), 15cps (unimputed due to special dividend clearing out all the imputation credits).

If I replace that last dividend of 15c with a tax paid equivalent:

15c x 0.72 = 10.8c

then the total net dividends add up to $1.228 over the median four and one quarter years holding period. At $5.10 (the CEN share price as I write this), my capital gain over my average purchase price is:

$5.10 - $4.82 = 28c

Add this to the net gain from dividends over the period of $1.228 and the total net gain per share is $1.508. $4.82+$1.508=$6.328. This gain is over 4.25 years. So we can work out the compounding annual return as follows:

$4.82(1+i)^4.25= $6.328 => i=6.6% (net) or 9.2% gross

9.2% is not a get rich quick scheme. But it is an excellent return for a utility type asset. However, if you were shallow enough to do no homework and just look at the chart over that four year period, you might convince yourself that I had made a significant loss over the same timeframe! This kind of thing is why I don't use charts when I make my high dividend yielding investments.

SNOOPY

[albundy29]

Finally read the writing on the wall.
The "independent" director doesn't have the support of the now departed majority owner.



CEN / Announcements



Phil Pryke announces retirement from Contact Board

12:48pm, 11 Sep 2015 | DIRECTOR

MEDIA RELEASE

For immediate release

Friday 11 September 2015

Phil Pryke announces retirement from Contact Board

Following the announcement today that Sir Ralph Norris will be joining the Board of Contact Energy Limited (Contact) as a new independent director and if successfully elected by shareholders will be appointed as Chairman, Phil Pryke has announced that he will be retiring from the Contact Board and not seeking re-election at the Annual Meeting.

Phil has been involved with Contact since its establishment in 1995 and was the Chairman of the Board until October 2004. Since then, Phil has been Deputy Chairman and the lead independent director and was instrumental in helping Contact prosper through its many challenges and opportunities. Phil has guided Contact through its recent $2bn investment programme which positions Contact well for the New Zealand energy market.

“It is with a great sense of pride, and, I’ll admit, a tinge of sadness that I have decided to retire from the Board of Contact and therefore not seek re-election at the Annual Meeting,” Phil said.

“In the 20 years I have been involved with Contact I have seen it develop and grow from a collection of ECNZ assets to the strong integrated energy company that it is today.

“As part of the process to find and appoint new directors and a Chairman, I have spoken with investors – large and small – to gather their input on the types of skills and expertise required to direct Contact in the future. While a large part of me would like to continue on as a director now is the time for Contact to benefit from different expertise and fresh perspectives.

“I am excited to be handing over the role of Chairman to Sir Ralph Norris, who has the experience and expertise for the next stage in Contact’s future. During the next few months I will work with Board, Management and Sir Ralph to assist in an orderly transition.”

Dennis Barnes, CEO of Contact said, “I’d like to thank Phil on behalf of Contact, his fellow Board members and our shareholders for his outstanding contribution to Contact over the last 20 years. During my time as CEO, Phil has provided me with invaluable guidance and advice and while he will no longer be on our Board I hope that I can continue to draw on his unparalleled experience in the New Zealand electricity market.”

 
Mr Pryke will stand down from his role as Interim Chairman and Independent Director at Contact Energy’s Annual Meeting later this year.

[sb9]

Very pleasing announcement, Sir Ralph will be breath of fresh air. Phil never had any support from Instos or fund managers, was only survived this long due to Origin.

Does anyone know how far is ASX listing away, not that long to go I think.

[pierre]

Hard to believe the departure of Phil and the appointment of Sir Ralph has been greeted by a drop in the SP.

I thought everyone would be delighted at not having a Pryke on the Board!

[IAK]

20 years what a joke.

[Jantar]

Hard to believe the departure of Phil and the appointment of Sir Ralph has been greeted by a drop in the SP.

I thought everyone would be delighted at not having a Pryke on the Board!

Great to see him gone. I'm sure Mr Market will see the positive side of this fairly soon.

[Snoopy]

I managed to buy a small parcel today at $5.50 to add to my holding. That was based on the gut feeling that investors wouldn't let it slip below $5.50, a feeling that has so far proved correct. Average price paid overall is now $4.81, with a steady stream of decent dividends to add to my return over the years. My original holding was bought at float time (1998)! I have added to that since both through buying more and the dividend reinvestment scheme as funds permitted. Have never sold any. Owning CEN shares today isn't a get rich quick scheme. But it has proved a great core portfolio investment.

That gut feeling came back today. Very disappointed to miss out on getting some CEN shares at the Origin sell down placement price. But when the share touched $5 today, I just had to buy some more. This is exactly equivalent to my end of April purchase, accounting for the fully imputed 50c special dividend paid during the year. Ok less cash inside Contact does make it a little weaker, and will add a bit to the interest bill. But the underlying yield story remains, and may be a little stronger than when I looked in April. It was a hard toss up between topping up with MRP or CEN. But with El Nino on the horizon, I feel Contact may just benefit with their gas peaker station at Stratford. That's what swung my investment choice today.

SNOOPY

[fish]

Agree-I topped up at 501
Well I really invested my latest dividend.