With Tony Rice’s Cable & Wireless Communications perched just off their 52 week (and all time) lows, it will be interesting to see how the market reacts to their results due next week on the 24th May and whether there is in fact a dividend cut that has been speculated about by some analysts.
With a market cap now of just over £700m and EBITDA flagged of circa £540m, the shares sit on a derisory PE of just 6 times. We covered Cable & Wireless Comms in our May issue (Link here http://issuu.com/spreadbetmagazine/docs/v03 – Page 41) in the Directors Dealings column where we found it interesting that CEO Tony Rice had continued to buy the shares down from the 60p level (where he presumably felt that there was value) to the early 30p’s. Mr Rice now holds some 30m shares with an average price in the late 30p’s – nearly £15m of his own money being spent in recent years – a real show of faith and alignment in my book..
Even if there is a dividend cut, with the current yield of a shade over 17%, the halving of the payment to restore a reasonable degree of cover and allow the debt to be reduced over the next few years would still leave the shares yielding over 8%. At this level, we believe the shares over a good risk:reward profile, particularly for the more patient investor.
Chart below –