This week we don’t have a new teaser solution for your Friday File pleasure, so I’ll stick with some updates on a few stocks I’ve been watching this week… and next week, we’ll get our “Idea of the Month” piece up for you. And we also have a new piece from Dr. KSS up today, in case you’re one of our crew who follow the good Dr.’s discussion threads or are interested in biotech and health care stocks.
First the bad news — weakness continues for Grenville Strategic Royalty (GRC.V, GRVFF), which I used as a bad-news example a couple weeks ago. At the time, I had sold half of my position because I hit the stop-loss trading alert price, but said that my inclination was to hold through a weak period and see if they can recover. I also said that “I don’t expect the stock to bounce back quickly, but nor do I anticipate that it will take a further substantial drop unless they announce a major cut in the dividend.”
This week, to add fuel to the fire, they did announce a major dividend cut. The dividend, still paid monthly, will now be five cents a year instead of the seven cent annual rate at whcih they’d been paying for the past six months. That’s still higher than the dividend was before the increase last Fall, and with the collapse in Grenville shares since earnings the stock now carries an anticipated yield of 13.5%.
Which should tell you that investors are still worried — and they’ve been continuing to stream for the exits. I haven’t sold any more of my shares, so at this point I’m committed to holding the stock through the next earnings release, which will be next Friday. Investors will be keeping a very, very close eye on the credit quality of the portfolio when they report this time, and there will be a lot of questions rolling through my mind as I review the next report — how many of the investee companies are still making their payments? Is this recent weakness because of crisis conditions at just a couple of their investee companies, or is the problem more widespread? Is the cash flow from what we already know will be a weaker first quarter enough to keep supporting even this lower dividend? What’s the situation looking like for the second quarter ...