I can only see limited value in commenting on company announcements and/or news that has just hit the screen. The consensus can change instantly. For me the focus the focus should be on what is most likely to happen next and when. The real value must be in identifying what the next consensus is likely to be.

Direct Line Insurance: Dividends likely to resume next month.

It’s a December fiscal year end company. We should be hearing from them in the next couple of days. The company will then give a date for their half year results which should be published at the end of July or possibly the 4th of August.

You may recall the last thing they said in a trading update from the 6th of May…. “Notwithstanding our strong capital position, in recognition of the regulatory guidance and heightened uncertainty in the macroeconomic environment, on 8 April the Board announced that it would no longer be recommending the final dividend for the year ended 31 December 2019.” I would also point out that they went on to link the resumption of dividends with bonus payments for the directors…“Given the continuing uncertainty resulting from Covid-19, the Group has agreed that Executive Directors will not be considered for any bonus for 2020 until dividends for ordinary shareholders resume”. The company also said, and I have highlighted some of their text in bold….“Acknowledging the importance of dividends to shareholders we will review our dividend position alongside our half year results and on an ongoing basis once it is possible to have a better understanding of the impact of Covid-19."

They will indeed have a better understanding by the end of July. Lock down is already easing.

Passing the 2019 final dividend was, in my view, at the general request of the PRA and, as they made it clear, their capital position remains strong. “Our estimated solvency capital ratio at 31 March 2020 was 174%, increasing to an estimated 177% on 1 May 2020, towards the top of our 140% to 180% risk appetite range.” I am not aware of any of their staff being on furlough.

The historical stated dividend policy is as follows, “We aim to grow the regular dividend in line with business growth. Additionally, we look to return any capital to shareholders which is expected to be surplus to our requirements for a prolonged period.”

If…

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