Question: What is your view on buying into the Duet (DUE) retail rights issue?
Answer: (Paul Rickard): Duet provides solid, but not spectacular income and income growth opportunities. It has reaffirmed guidance for a distribution of 18c per unit in FY16, rising to 19c by FY18 and potentially, an unfranked yield of 8.0 to 8.5%.
In terms of the security purchase plan (SPP), retail investors will pay the lesser of $2.20 (the price paid by institutions), or a 2.5% discount to the weighted average trading price over the period 22 April to 29 April.
The acquisition (the remaining 20% in the Dampier pipeline) makes sense, and while the SPP is no bargain, the degree of risk with this stock is low to moderate.
Question: I am holding a fair share of my portfolio in the big four banks, which are paying good dividends for my SMSF. With the price dropping, do you feel I should sell part of my bank share portfolio or, as suggested by Paul Rickard, hold onto them?
Answer (Peter Switzer): It’s very hard for me to advise you to sell your banks stocks as:
a) I don’t know how overweight you are; and
b) I don’t know what the tax implications are.
I am not selling my bank stocks at the moment as I am with Paul and think, in time, the market will see the value. However, they are on the nose at the moment – and I think it will take a while (read some pretty positive news) to change sentiment. So, probably, some pain to come – and if you aren’t up to this, you may wish to consider your exposure.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
