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  1. #886
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    Default Capitalised Dividend Valuation: FY2016 to FY2020 data

    Quote Originally Posted by Snoopy View Post

    I am not sure SCT management see themselves as a 'no growth' company. But as investors I think it is reasonable to assess the company as a dividend payer only to get some idea of value.

    The calculation to work out the equivalent gross figure for the FY2020s unimputed dividend, is as follows:

    FY2020 P1/ 4.0c (18.41% imputed) = 0.736c (FI) + 3.264c (NI) = 0.736c/0.72 +3.264c = 1.022c +3.264c = 4.29c (gross dividend)

    Year Dividends as Declared Gross Dividends Gross Dividend Total
    FY2015 5.5c+2.5c N/A c + 3.47c 3.47c
    FY2016 5.5c+4.0c 7.64c + 5.56c 13.20c
    FY2017 5.5c+4.0c 7.64c + 5.56c 13.20c
    FY2018 6.0c+4.0c 8.33c + 5.56c 13.89c
    FY2019 6.0c+4.0c 8.33c + 5.56c 13.89c
    FY2020 4.0c (18.41% I) + ?c 4.29c + ?c 4.29c
    Total 61.94c

    Averaged over 5 years, the dividend works out at 61.94/5 = 12.4c (gross dividend).

    I have given some thought as to whether I should revise my sought for "gross yield" in this new environment of very low interest rates. I think that given the trade wars and the inability to move production from affected international production sites, I should not do this.

    So based on my previously selected sought after 7.5% gross yield over an historic five year business cycle window, , 'fair value' for SCT is:

    12.4 / (0.075) = $1.65

    Now using my plus and minus 20% range to get a feel how the SCT share price might behave at the top and bottom of its business cycle.

    Top of Business Cycle Valuation: $1.65 x 1.2 = $1.98
    Bottom of Business Cycle Valuation: $1.65 x 0.8 = $1.32

    At this part of the investment cycle, with conditions very favourable towards shares, I would argue that SCT shares trading at $2.30 (above the upper end of my expected range) are now overvalued by 16%.
    I am not sure SCT management see themselves as a 'no growth' company. But as investors I think it is reasonable to assess the company as a dividend payer only to get some idea of value.

    The calculation to work out the equivalent gross figure for the FY2020s unimputed dividend, is as follows:

    FY2020 P1/ 4.0c (18.41% imputed) = 0.736c (FI) + 3.264c (NI) = 0.736c/0.72 +3.264c = 1.022c +3.264c = 4.29c (gross dividend)

    Year Dividends as Declared Gross Dividends Gross Dividend Total
    FY2016 5.5c+4.0c 7.64c + 5.56c 13.20c
    FY2017 5.5c+4.0c 7.64c + 5.56c 13.20c
    FY2018 6.0c+4.0c 8.33c + 5.56c 13.89c
    FY2019 6.0c+4.0c 8.33c + 5.56c 13.89c
    FY2020 4.0c (18.41% I) + ?c 4.29c + 0c 4.29c
    Total 58.47c

    Averaged over 5 years, the dividend works out at 58.47/5 = 11.7c (gross dividend).

    I have given some thought as to whether I should revise my sought for "gross yield" in this new environment of very low interest rates. I think that given the trade wars and the inability to move production from affected international production sites, I should not do this.

    So based on my previously selected sought after 7.5% gross yield over an historic five year business cycle window, , 'fair value' for SCT is:

    11.7 / (0.075) = $1.56

    Now using my plus and minus 20% range to get a feel how the SCT share price might behave at the top and bottom of its business cycle.

    Top of Business Cycle Valuation: $1.65 x 1.2 = $1.87
    Bottom of Business Cycle Valuation: $1.56 x 0.8 = $1.25

    SCT shares were trading at $1.84 on Friday 22nd May (near the upper end of my expected range) and are IMO now fully valued (from a business cycle projected dividend income perspective). With big capital spending programs on hold for many customer companies, and dividends from more buoyant years boosting my valuation, a significant recovery in business is already priced into SCT shares as they trade today The growth story, if it still exists, has not been priced in though.

    SNOOPY
    Last edited by Snoopy; 23-05-2020 at 07:10 PM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

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