Forum Archive Index - July 2001

["Bruce Harris" <bruce99@freemessage.com>]

Most of us would be content with a 15% return medium term. your valid question 
is how long they can sustain this dividend. You note that the PE is apparently 
21. Others will have a better explanation, but how I use PEs is to divide them 
into 100- in this case giving a return in a profit sense of approximately 5%. I 
note that thier PE on the Direct Broking site is shown at about 48- i.e. a 
return of 2%. In either case they therefore fund most of their dividend out of 
reserves- this is not sustainable for a long period- unless their earnings 
increase. even at the PE of 20- or return of 5%- they will need to grow 
earnings 200% to fund the dividend out of profits. Or 100% if you are happy 
with 10%.
Am not that familiar with the Akld commercial property market but doubt they 
will achieve that kind of growth. In fact there must be some sort of risk of a 
decline. Also the portfolio is not all that big so that management costs must 
be relatively high as a proportion of revenues.
So up to you- but the 15% looks difficult to sustain- unless there's something 
about the company that is not obvious. Regards, Bruce


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