Tuesday, 13 December 2011

Portfolio Buy: Inmarsat (LSE:ISAT)

As always, I continue to be on the lookout for good new dividend-paying shares for my High Yield Portfolio. These high-yield shares form Level 6 on the DIY Income Investor Income Pyramid).

Inmarsat plc is a provider of global mobile satellite communications services, providing data and voice connectivity to end users worldwide.

The company has been ejected from the FTSE 100, as a result of consistently losing value over the past year-and-a-half, in line with the worldwide recession, particularly in shipping and aviation. Leaving the FTSE 100 typically results in a further fall in share price, as the FTSE 100 trackers have dumped the stock.

Inmarsat came up on my radar due to its current relatively high (historic) dividend yield - nearly 6% and a respectable forecast dividend cover of 2 and a cheap p/e ratio of around 9, particularly for a 'technology' share (a sector that is under-represented in my portfolio). So - a good dividend at a reasonable price.

Inmarsat was founded in 1979 to ensure that ships could stay in constant touch by telephone. In 1999, it became the first intergovernmental organisation to transform into a private company and, in 2005, was floated on the London Stock Exchange. So, Inmarsat has a relatively short dividend record - nevertheless it has a current dividend policy and has paid an interim and final dividend for the last three financial years.

The Company’s segments include Inmarsat Global, which includes supply of wholesale airtime, equipment and services to distribution partners and other wholesale partners of mobile satellite communications by Inmarsat Global business, and Stratos, which includes supply of advanced mobile and fixed-site remote telecommunications services and provision of customised turnkey remote telecommunications solutions. Inmarsat's award-winning Broadband Global Area Network (BGAN) service, for example, makes it possible for TV broadcasters to beam live breaking news from remote locations into millions of homes.

The acquisition of Segovia, a provider of secure IP communications systems strengthening its relationships to US government agencies.

Inmarsat has 11 geostationary satellites, which provide a portfolio of global mobile satellite communications services for use on land, at sea and in air. It includes voice and broadband data services, which support safety communications, as well as email, Internet, secure virtual path number access and videoconferencing. As of August 2010, Boeing, the US aerospace manufacturer, has been contracted to build a pioneering new constellation of satellites - the Inmarsat-5s. They will form the backbone of the planned Inmarsat Global Xpres network, delivering mobile broadband speeds of up to 50 megabits per second.

Inmarsat therefore have a unique position in satellite communications, although it is obvious that this does not guarantee sustained high earnings (and therefore dividends). The company does seem to be well financed and well positioned for future growth in international telecommunications. Most debt is in the form of long-term bonds and convertible debt or project finance to fund satellites.

Motley Fool liked Inmarsat at a much higher price.

I waited until Inmarsat was de-selected from the FTSE 100 (on December 7th) and bought at almost exactly £4. Will it skyrocket? Or plummet into the sea?




I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

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