Good morning! 

What's on the agenda today:

Duke Royalty (LON:DUKE)

  • Share price: 47.85p (+2%)
  • No. of shares: 200 million
  • Market cap: £96 million

Dividend Declaration

(Please note that I have a long position in DUKE.)

Duke keeps its quarterly dividend flat at 0.7p. This will be the fifth consecutive payment at this level.

Based on 200 million shares outstanding, this comes at a cost of £1.4 million annually.

For context, Duke generated operating cash flow of £1.3 million in H1 this year, from £1.8 million of royalty receipts.

At Mello, I again expressed the view to Neil Johnson (CEO) that compounding wealth inside Duke would be the best way to grow shareholder wealth. So I am happy for Duke to keep the dividends flat, even if it could afford to be more aggressive with them at this early stage.

The trailing yield based on these flat quarterly dividends is 6%. Some shareholders think that this yield should compress as the business model proves itself over time and diversifies. The share price should gradually increase to bring the yield down to 5%, for example.

If we get an increase in quarterly dividends (which should be affordable, in due course) and a compression in yield, that would be a double whammy for the share price.

I plan to wait and see what the company achieves over the next year or two, before making any change to my current position.

One of Duke's brokers recently forecast that the dividend per share for the current financial year would be 3.6p. For this to be achieved, I think the next dividend would need to be increased. 3.6p per share represents a forward yield of 7.5%.

An adventurous financial stock carrying significant risks, but I'm optimistic about this one.

Quartix Holdings (LON:QTX)

  • Share price: 277p (+9%)
  • No. of shares: 48 million
  • Market cap: £133 million

Trading Update

The market loves this update.

H1 is running ahead of expectations and Quartix says it will make at least £25 million…

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