Digging up a dividend
The big listed miners are rising back up the payout table. The self-discipline that had been the order of the day as the diggers sold off non-core assets and slashed their unit costs has softened with rising commodity prices.
Anglo American (AAL) is poised to rejoin the other three major listed miners on the dividend list, while Rio Tinto (RIO) and BHP Billiton (BLT) both pledged to return around half of their underlying earnings to investors. Rio was able to add a share buyback and BHP a bond buyback after cash flows improved markedly.
But if President Trump's grand fiscal plan gets snarled up in Congress, and Chinese demand falters, investors may yet be more thankful for the progress of these companies on productivity.
Globalisation is good
For recruitment company bosses, it is again time to stress your company's international exposure - assuming it is in the right place.
The staffers exist at the sharp end of the economy, and those exposed to the domestic energy and finance sectors have suffered with these industries in recent times.
Yes, many UK hiring managers pressed the pause button after the EU referendum result, but Hays (HAS) saw improved trading towards the end of the calendar year. Still, the company's continental and Asia-Pacific markets are the drivers of its net fee income growth. For PageGroup (PAGE), Europe, Australasia and Latin America - excluding Brazil - were the bright spots. Diversification is again the watchword.
What can stop housebuilders?
Persimmon (PSN) is back above the £20 mark. This fairly arbitrary observation of the largest listed housebuilder means its market value is back at all-time highs, despite dipping below £13 last year in the referendum aftermath.
This results season provided plenty more reason to think that the sector can't be stopped: supply/demand yadda yadda; the government's latest piecemeal intervention; the embarrassing levels of profit fuelling dividends galore. But with market leaders Persimmon and Taylor Wimpey (TW.) trading at twice their forward net asset value, and the top five at an average multiple of 1.8, buyers have to be fairly confident on the prospects for the residential property market as the UK leaves the EU.
The cost of the high street
The death of the high street has been predicted so often that it would be tempting to dismiss the prospect. Indeed, Amazon (us:AMZN) and other e-commerce giants are adding physical retail space. But this will hardly rescue the business model of a traditional retailer predicated on a nationwide retail estate.
That's whether you are selling cardies or cider. JD Wetherspoon (JDW) projected £20m in additional costs ranging from electricity and excise taxes to business rates and the minimum wage. Next (NXT) expects around £36m in cost increases, which it is doing its best to offset. It's no wonder that Chancellor Philip Hammond has promised to find a "better way of taxing the digital part of the economy". But the bricks-and-mortar vendors won't be holding their breath for accompanying tax cuts.
Cash in the age of uncertainty
At the IC, we like to emphasize the importance of cash flow when assessing a company's performance. This approach is all the more important given the uncertain corporate landscape. Two examples are Royal Dutch Shell (RDSB) and Aviva (AV.).
The oil major managed to improve operational cash flow by two-thirds in 2016, as income rebounded. The insurance group's business segments threw off more cash, allowing for an increase in capital returns. But this short-term income certainty should not be mistaken for long-term business sustainability. After Shell's austerity and Aviva's Friends Life synergies, both groups may have to reassure on the longer-term plan.
