The London Stock Exchange (https://www.londonstockexchange.com/) is down today.
There are a few “risers” but most FTSE 100 stocks are “fallers”. Included in the list of “fallers” is Phoenix Group Holdings PLC of 20 Old Bailey, London EC4M 7AN (https://www.thephoenixgroup.com/).
I’ve written before about this company and the fact that I am overweight in the stock. So much so, I’d call my position obese!
On days like these one reflects upon one’s past decisions and also the possible pattern of events to follow.
The one thing I am NOT going to do is to sell Phoenix stock.
The only thing to do in these circumstances is to simply “wait and see”.
So, what are this risks for this stock?
Well, I do NOT think that Phoenix will end up like Carillion plc that went into compulsory liquidation on 15 January 2018 (https://en.wikipedia.org/wiki/Carillion)!
Now that the interim dividend has been paid (today), so far as I am concerned the major risk is that the company might become a target for a takeover. If that happens the share price will rise. If such a take over bid succeeds, then my considerable shareholding will either be converted into the take over company’s shares or a cash sum will be paid to me or a combination of both.
Based on the stock price today, the shares would have to increase in value by around 40% to enable me to “get my money back”.
Phoenix (unlike Lloyds Banking Group) does not have a wide shareholder base and as such the stock can be subject to greater swings (+ & -) in it’s stock price; this because there are two aspects to a stock price on any particular trading day – the rise or fall in the price and the number of stocks being traded.
There is another short term risk for me as a Phoenix Group shareholder. Like most investors in this company, I have bought the shares for the dividend income. At today’s low stock price the yield is very high. Given the facts of my obese position I am not going to reinvest the handsome dividend I’ve received. The next dividend will be the final dividend the declaration date being 11 March, the ex-dividend date being 28 March 2024 and the payment date being 8 May 2024. If the situation with the stock price does not improve and gets worse, the board of directors may consider two actions or a combination of both. One would be to reduce or even cancel the final dividend and use the money to pay off debt. The other would be to start buying it’s own shares. Neither of these would be an investment disaster. Paying off debt would improve the balance sheet and buying it’s own shares enriches the remaining shareholders insofar as the company’s assets are owned by a smaller number of investors. It would however be a major blow to my and many people’s incomes.
The one thing that I can count upon however is my Old Age Pension!
Were I to loose the income of Phoenix Group it would impact my income but I’d still be OK in terms of paying all my bills.
Were Phoenix Group bought out in a cash takeover and I got all my money back and were I to invest the sum in the Dunedin Income Growth Investment Trust PLC (https://www.dunedinincomegrowth.co.uk/) I’d loose half the dividend income I receive from Phoenix.
Since the world is entering a dangerous time (https://www.bbc.co.uk/news/live/world-middle-east-67185260) and many people are suffering terribly, my introspection over my investments will likely be regarded as selfish.
They would not be wrong!