Trading212 Portfolio- 07/09/20

Weeks summary


Stock picked: Associated British Foods

Ticker: ABF

Shares added: 0.22

Total shares owned: 0.23

Dividend yield: SUSPENDED


Dividends received: £0.40


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This weeks stock


What does Associated British Food (ABF) do?


ABF operates as a diversified food, ingredients and retail company. The company operates through 5 segments, Grocery, Sugar, Agriculture, Ingredients and Retail.

The Grocery segment manufactures products including, hot beverages, sugar & sweeteners, vegetable oils, balsamic vinegars, breads and baked goods, cereals, meat products which then are sold to retail, whole sale and food service businesses.


The sugar segment grows and progresses sugar beet and sugar cane for sale for industrial users and to silver spoon which is included in the Grocery segment.


The agriculture segment manufactures animal feeds and provides other products and services to the agricultural sector.


The ingredients segment manufactures yeast, bakery ingredients, enzymes, yeast extracts and cereal specialities.


The retail segment is involved in buying and merchandising clothes and accessories through Primark and Penneys retail chains.


Fundimentals:

Dividend Yield: Previous yield of 2.27%

Payout ratio: 51.85%

Profit margin: 4.43%

Return on assets: 5.76%

Return on equity: 7.87%

P/E ratio (price to earnings): 14.74

Adjusted EPS: 137.5

EPS (Earning per share) Growth: 2%

BETA: 0.75

Cash: 1.35B

Debt: 4.1B

EBITDA: 2.08B


Stock breakdown:


On the 21st of April ABF announced that they were suspending their interim dividend payment, this dividend payment would have been roughly 12.05p per share.

If we take the previous yield and payout ratio we can see that they support a modest yield of 2.27% with a healthy payout ratio of 51%, which is nicely under the maximum 60% I normally like to see from a stock. Due to Covid ABF decided to play it safe and suspend their interim dividend. The final dividend payout is normally in January so it shall be interesting if they reinstate their dividend. [1]


Looking at the profit margin along side the return on assets & equity, these are all under the 10% I normally like to see. This shows ABF is at higher risk of decline of sales and will erase profits faster.


Surprisingly ABF have faired fairly well in the current climate with now being on track to hit £2 billion by the end of the year. They have warned of a slump in the annual earnings due to being forced to close stores but they are looking to come on the top end of estimated. [2]

Currently ABF are supporting a P/E ratio of 14.74 which to me indicates it's around fair value for the company if anything slightly under valued, as much of the UK market is.

We can see there has been a slight EPS growth, while this is better than nothing, and isn’t backwards, it’s not the greatest. It shows the management hasn’t been able to grow their earnings for us share holders.

The BETA for this stock is currently 0.75 so is a fairly volatile stock as is only 0.25 away from being as volatile as the current market.


ABF has managed to keep a decent amount of cash on hand which has helped them fair this market and has enabled them to meet any recent challenges. [3]


Comparing the cash to the debt, it would be nice to see this debt being reduced but for the foreseeable future I don’t see it happening.


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Dividends received

This week we received 6 dividend this week totalling

FSFL @ £0.13

LTC @ £0.03

UKW @ £0.10

INTC @ £0.06

PFE @ £0.07

V @ £0.01


Total dividend (6 month): £3.54

Amount for charity (6 month): £0.89


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General account summary

The last week of the open stock market has been very interesting as our flow of dividends has increased dramatically. Receiving 6 dividends within one week was a great feeling and this pushes the amount raised for charity up to £0.89, so we are well on track to beat last half years donation. I believe going into next year we will see a greatly increased cash flow through this portfolio and an ever increasing monthly dividends. I am hoping now that the portfolio has really started moving that next year we could change the donation from every 6 months to every quarter.


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[1] ABF dividend suspension

https://www.hl.co.uk/shares/share-research/202004/abf-cancels-interim-dividend


[2] ABF on track for £2 billion sales end of year

https://www.fidelity.co.uk/markets-insights/investing-ideas/shares/primark-track-top-2bn-and-target-prove-doubters-wrong/


[3] Produced more than ever during weeks of panic buying

https://www.foodmanufacture.co.uk/Article/2020/04/21/ABF-reveals-impact-of-food-panic-buying

What is:

P/E ratio EPS Payout ratio BETA Dividend

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