Wednesday tips round-up: Brit, Diploma

14th May 2014 07:29

Shares of Brit, one of the best Lloyd's performers during its time off the stock market, is quite surprisingly down from its recent flotation price of 240p. Yes, it is also trading at a premium of 40 per cent or so to its net asset value, but it offers a dividend yield of 8 per cent and the firm has pledged to pay out any excess capital in the form of a special dividend. That may amount to as much as 15p to 16p this year. Whether the basic dividend is safe is the question which some analysts are posing. Yet the company is comfortable with its ability to deal with any eventualities, such as the one-off losses that insurers are prone to, which might trip it up. Fair enough. As well, the company is increasing its exposure to more attractive specialist lines such as insuring fine art and high value home-owners and a growing US business, The Times's Tempus says. First-half revenues at distribution outfit Diploma were up across all three of its trading divisions, as were profits. However, the appreciation in the pound weighed on the latter. Even so, the company is well diversified by market segments and its products either wear out or are for one-off uses, needing to be re-ordered regularly, thus generating reliable and regular sales streams for the firm. Weakness in the Canadian and Australian dollars meant lower operating profits in life sciences, but that was offset by strong demand in civil aerospace which led to improved profitability at its controls business. Be that as it may, at 17 times' next year's earnings, and 19 times' this year's, not to mention the slow profit growth, the stock looks too highly rated despite the 8% boost to its interim dividend. Hold, says The Daily Telegraph's Questor column. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB