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When we tipped Randall & Quilter in October 2019 we said it looked cheap on a price-to-earnings ratio of 10 and a yield of 5.2pc and speculated that some investors had shied away because of the complexity of some of its insurance operations.
Either way, regrettably, the shares have merely become cheaper still, partly because in its annual results published last month it said it would cut its dividend from next year, even though it raised the 2020 payment by 5pc to 4p. Its new policy is to pay 25pc-50pc of profits as a dividend, against last year’s 56pc.
“We think it is important to have a policy that allows for an appropriate balance of reinvestment in our business and dividends to shareholders, as well as one that minimises the need to raise external capital,” R&Q said.
Shareholders reacted by knocking 5.8pc from its market value. One, Gervais Williams of Premier Miton, said he was “disappointed and surprised” by the dividend cut.
“There is cash on the balance sheet and no change in my confidence about the company’s ability to generate cash in the coming years,” he said. “Its potential has not changed one iota and we may well add to our holding at some stage.” We will hold.
Questor says: hold
Ticker: RQIH
Share price at close: 165p
Overall performance: average gain 37.1pc; outperformance 42.1 percentage points
Update: Kromek
This company, which makes advanced detectors for nasties such as dirty bombs, has disappointed since it joined the portfolio in January 2018; the shares have lost half their value in that time. Williams, who put us on to the stock, said Kromek had “amazing technology and great products, which will be adopted in time”.
He added: “I’m a patient investor but I have spent years waiting for this company to generate cash. It has been a bit unlucky with pandemic-related delays and has had to raise more money. It is still very lowly valued.”
Williams has cut his holding but retains a stake. We’ll hold on.
Questor says: hold
Ticker: KMK
Share price at close: 12.7p
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