First, the Pound has fallen, so going abroad is expensive. Second fixed-income securities are fully priced because of a combination of low interest rates and Quantitative Easting. Finally, cash returns are dismal.
So, the only place to go seems to be back to high-yield dividend shares.
Balfour Beatty plc is about infrastructure. It is the
The current dividend yield is 5.4% with dividend cover of 2.5% (the dividend is up a token 2% on the previous year). The p/e ratio is low - under 10.
The Final Results for 2012 are pretty uninspiring, with revenue marking time and profit margins sliding. The golden nugget at the heart of the operation is their portfolio of PPP (public/private partnership) contracts, which have been revalued at £3/4 billion, following a couple of lucrative sales.
However, a sign that all is far from well is that they are withdrawing completely from the rail business in Europe. But this company is involved in so many infrastructure sectors all over the world to make this exit probably no more than a blip on its overall progress. It is reassuring that they are willing to make difficult decisions like this.
The big elephant in the room is the pension fund, with a deficit of a £1/3 billion; this deficit has increased substantially in the year. This will continue to be a drain on company cash (currently £1m per month).
Having said all that, this is a punt on UK and - more importantly - international infrastructure investment, which in turn will be affected by government finances and business expectations of future growth. 2013 may continue to be a difficult year but there are some signs that infrastructure investment may take off later in the year.
[Purchase price: £2.595 per share]
Update 28/3/13. The share price fell around 10% since purchase - close to an all-time low. I think this is unnecessarily pessimistic, so I have doubled up. Purchase price £2.35 per share.
Update 29/4/13. Profit warning issued, mainly due to poor UK market performance, although overseas results are expected to be broadly 'in-line'. So it looks like I got my timing completely wrong! Disappointing, but I will continue to hold.
I am not a financial adviser 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.