Diamonds & Dogs: You don’t have to be a smoking addict to get the BAT dividend

 Diamond: British American Tobacco (730c, YTD:  102.78%, Mkt Cap $126,885,074)

Diamonds & Dogs does not smoke cigars and or cigarettes, has never smoked and will never smoke.

However, he couldn’t help but take not of the BAT share price rally from the time the 1HY2012 results were released to the period post FY2012 results.

The counter has rallied hard again in 2013 following FY2012 financials that registered attributable profit that was up 151% at $12.3m resulting in earnings per share of $0.71.

The shareholders were blessed with a final dividend of $0.42 bringing total dividend for the year2012.to $0.65.

The big question on any investor’s mind is whether $7.30 is still a god price for the counter. There is no doubt the aggressive dividend policy will stay with the company which can easily gear the balance sheet should the need for capex be there.

But will the dividend yield alone going to be a sustainable return without complementary capital gains.

Diamonds & Dogs doesn’t have any answer to that say to say the company is definitely a dividend play.

BAT markets both Global Drive Brands (e.g. Dunhill &Newbury) and local brands like Madison, Everest, Kingsgate and Berkeley. Madison is the flagship brand contributing about 68% of volumes. Premium brands constitute up to 25% of sales volumes.

The premium brands never saw the decline in volumes that was witnessed on mass market following price reviews upwards on the back of increases in excise duty.

Diamonds & Dogs can only say surely the smokers are holding on to their Madison!

Dog: Aico (4.90c, YTD -45.56%, Mkt Cap $26,165,374)

Diamonds & Dogs feels sorry for institutional investors stuck in Aico. The equities gods are surely angry with the Aico shareholders.

The share price for the company has hit basement lows and shows no sign of recovering as the promised “series of transactions” take ages to be done.

The debt hellhole is certainly inching beyond the $50m reported sometime back when the fundraising exercise was proposed.

Potential investors have come and gone.

Now there are proposals to further unbundle the group and unlock shareholder value.

Unfortunately, that too may feel the SeedCo spanners (the flagship of the group) following dismal performance from the “African See company”.

Aico’s woes have not been helped by the cotton price wars which will not go away unless the cotton price sustains its upward trajectory that has seen it recover to 87c/lb so far.

But again, a good cotton price is no use when most farmers (those in regions that allow crop change) migrated to the toast of the moment tobacco.

In the meantime the Aico investors have had to content with series of cautionaries (which can make a good novel entitled “The Art of Repeat Cautionaries” if one compiles all the releases since the exercise started.

Diamonds & Dogs is lucky to have last dealt in Aico shares years back when he liquidated his position at 21c per share.

He, however sincerely hopes that the corporate restructuring exercise will bear fruit not in the too distant future for the sake of cotton farming in the nation and shareholders of the stock.

Invest Wisely!

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