{"id":27382,"date":"2023-03-20T08:06:40","date_gmt":"2023-03-20T08:06:40","guid":{"rendered":"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters"},"modified":"2023-03-20T08:38:23","modified_gmt":"2023-03-20T08:38:23","slug":"aspens-dividend-cut-wrongfoots-bond-proxy-hunters","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters","title":{"rendered":"Aspen\u2019s dividend cut wrongfoots bond-proxy hunters"},"content":{"rendered":"

Africa-Press – Mauritius. <\/strong><\/span>The case of Aspen Pharmacare, Africa\u2019s largest pharmaceutical manufacturer which in September scrapped its dividend, is a warning to investors on the hunt for bond proxies, or shares that pay reliable dividend income.<\/p>\n

Previous articles in our series on income investing in Africa, have considered Grit Real Estate, Anglo American and Mondi. The articles are not presented as investment advice and readers should take professional advice and\/or do their own research.<\/p>\n

The company said on September 11 the debt service payments and the need to reduce balance-sheet leveraging meant that \u201cit would not be prudent\u201d to pay a dividend.<\/p>\n

The company gave no indication of when it might resume payments. The last time that Aspen did not pay a dividend to shareholders was in 2009. Developed market investors are faced with the prospect that low or negative interest rates are here to stay.<\/p>\n

That\u2019s prompting a race to find new sources of income at reasonable levels of risk \u2013 including emerging market equites with long records of paying dividends.<\/p>\n

Aspen illustrates how difficult that search can be. \u201cSuspending the dividend is not a usual approach to debt reduction,\u201d says Steven Jon Kaplan, CEO of True Contrarian Investments in New Jersey.<\/p>\n

\u201cIt sends a negative message.<\/p>\n

\u201d The last time Aspen omitted their dividend, Kaplan notes, was at the height of the great financial crisis. To do so now is \u201crather surprising \u2013 a big red flag. \u201d<\/p>\n

Aspen\u2019s debt ballooned after a series of acquisitions including GlaxoSmithKline\u2019s thrombosis drugs in 2013 and AstraZeneca\u2019s anaesthetics portfolio in 2016.<\/p>\n

The company was able to reduce its debt by 27% in the six months to June, and predicts a further reduction in 2020. The shares rallied on the news of the lower debt.<\/p>\n

Still, the remaining debt level of 39bn rand is \u201crather high \u2013 a potential warning sign,\u201d Kaplan says. He argues that the company\u2019s ability to keep reducing the load \u201cdepends on things that are out of their control\u201d, such as the global economic outlook.<\/p>\n

No timetable The company\u2019s recent borrowings have been at higher rates and for shorter terms, Kaplan says \u2013 suggesting problems at a time when most companies are looking to lock in historically low borrowing costs for the long term.<\/p>\n

Also receive offers from The Africa Report Also receive offers from The Africa Report’s partners In May 2018, Aspen refinanced its debt facilities with an agreement with 28 lenders for an expanded facility for 3.4b euros.<\/p>\n

The facility has lending periods of two and four years. As an Aspen shareholder, Kaplan was not impressed by the \u201cvague and brief\u201d statement that buried the news of the dividend cut at the bottom.<\/p>\n

\u201cIt\u2019s not intelligent PR,\u201d he says, adding that the lack of any timetable for a resumption of dividends is also a concern.<\/p>\n

The cut was seen by investors as a prudent move in light of the company\u2019s debt levels, says Izak van Niekerk, investment analyst at Mergence Investment Managers in Cape Town.<\/p>\n

Debt concerns have led to a heavy market discount on the share price, so \u201cpassing the dividend to enable faster reduction of gearing levels should be more beneficial\u201d, he says.<\/p>\n

Mergence predicts that seasonality in the business may affect debt levels negatively for Aspen\u2019s interim results, but expects the company will be successful in reducing gearing levels for 2020 and after. Bottom Line: Large and still increasing debt loads are a warning sign that even well-established dividends may be under threat.<\/p>\n

For More News And Analysis About Mauritius<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Mauritius. The case of Aspen Pharmacare, Africa\u2019s largest pharmaceutical manufacturer which in September scrapped its dividend, is a warning to investors on the hunt for bond proxies, or shares that pay reliable dividend income. Previous articles in our series on income investing in Africa, have considered Grit Real Estate, Anglo American and Mondi. […]<\/p>\n","protected":false},"author":84,"featured_media":27380,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,6],"tags":[242,233,245,241],"class_list":["post-27382","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-files","tag-africa","tag-africa-press","tag-africa-press-mauritius","tag-mauritius"],"yoast_head":"\nAspen\u2019s dividend cut wrongfoots bond-proxy hunters - Mauritius<\/title>\n<meta name=\"description\" content=\"The case of Aspen Pharmacare, Africa\u2019s largest pharmaceutical manufacturer which in September scrapped its dividend, is ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Aspen\u2019s dividend cut wrongfoots bond-proxy hunters\" \/>\n<meta property=\"og:description\" content=\"The case of Aspen Pharmacare, Africa\u2019s largest pharmaceutical manufacturer which in September scrapped its dividend, is ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters\" \/>\n<meta property=\"og:site_name\" content=\"Mauritius\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2023-03-20T08:06:40+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-03-20T08:38:23+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/mauritius\/sites\/61\/2023\/03\/postQueueImg_1679287247.50.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"732\" \/>\n\t<meta property=\"og:image:height\" content=\"419\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"Aspen\u2019s dividend cut wrongfoots bond-proxy hunters\",\"datePublished\":\"2023-03-20T08:06:40+00:00\",\"dateModified\":\"2023-03-20T08:38:23+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters\"},\"wordCount\":593,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/mauritius\/sites\/61\/2023\/03\/postQueueImg_1679287247.50.jpg\",\"keywords\":[\"Africa\",\"Africa Press\",\"Africa Press-Mauritius\",\"Mauritius\"],\"articleSection\":[\"all news\",\"files\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters\",\"url\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/aspens-dividend-cut-wrongfoots-bond-proxy-hunters\",\"name\":\"Aspen\u2019s dividend cut wrongfoots bond-proxy hunters - 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