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Hoping from extra dividends from Volvo

Most fund holdings have now posted fourth-quarter 2019 results. Volvo, SCA, Holmen and NCC were among those with positive results, and the numbers from SEB and Swedbank were also welcomed.

Volvo’s report was robust on most points, and profitability was higher than expected mainly due to growth in the Construction Equipment division. The company generated strong cash flow and, combined with its robust financial position, this led the board to propose an extra dividend. Together with the ordinary dividend, the yield is 8 percent. This will not be sustainable, but given Volvo’s strong position and rising expectations of being able to generate good profitability even during years of lower demand, there should be room for more extra payouts. Even without extra dividends, the ordinary dividend gives a good 3 percent yield.

Epiroc’s report was met with less enthusiasm. The main problem was lower activity in the Equipment division, while demand and profitability in Service were as expected. Order intake was a bit disappointing. Fluctuations between quarters in large projects can be big, but this does nothing to change our view of Epiroc as a very interesting company for the long run, with high profitability, low debt and potential to grow through acquisitions. A focus on developing fossil-free products also means the company will benefit from increased interest in sustainable investments.

On the bond side, the holding in Örstedt was sold to finance purchases of bonds issued by Stillfront, Klaveness and Hurtigruten. Stillfront reported a strategic acquisition of a US game studio, and its bond borrowing was extended as part of the financing. Klaveness seems to be one of the few shipping providers with vessels able to switch between dry and liquid cargos, offering environmental savings of around 30 percent over conventional tankers that operate with cargo in only one direction. Hurtigruten refinanced its debt in the bond market and generated great interest.

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