Good morning! 

Lots of interesting stories to digest today.

Duke Royalty (LON:DUKE)

  • Share price: 45p (+1%)
  • No. of shares: 198 million
  • Market cap: £89 million

New royalty agreement

Please note that I currently own DUKE shares.

Duke is an unusual investment vehicle. I wrote about it last month, when it raised £44 million in new equity.

It has raised £79 million (gross) in total from investors so far, at 40p and 44p.

As I have written previously, it won't be a very confident hold for me until I feel happy with its level of diversification.

Today we have news of a £10 million deal, including the temporary option to increase the investment by a further US $5 million. I guess it will do that depending on progress with other deals over the next few months.

The yield is fantastic: over 13% in cash, received monthly. The payments will vary in future years depending on revenue generation by the investee's parent.

The investee is a Canadian company, operating internationally. It specialises "in the development, commissioning and management of healthcare facilities and services using a public-private partnership model. "

Payments will be received for 30 years unless the investee exercises its buyback option. Note that there is no repayment of principal at the end of 30 years. It works more like an annuity.

My opinion

The Duke portfolio has five investees now - it is gradually improving its diversification. My confidence is very slowly improving, the longer we go without a mishap. There is a long way to go yet.

The main attraction for me is the high yield that Duke achieves with each deal, and the possibility that it could compound this wealth over time by reinvesting the proceeds.

The dividend yield is of less importance, but it doesn't hurt. The most recent quarterly dividend was 0.7p, implying a…

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