SPC
After the annual stockholder meeting 2 weeks ago, SPC has finally declared a dividend of 0.20 PHP/sh. This is 50% lower than the usual 0.40 PHP/sh they give out as the first tranche dividends annually. They haven't made good earnings for the last quarter of 2021 and the dividends that were declared are from "company internally generated funds". This means that the dividends are not mainly from the earnings of a company but most of them are from saved cash. This kind of looks bad because SPC insists on paying out dividends to make investors happy but it will be unhealthy in the long run if SPC fails to go back to its usual earnings. The good thing is that the dividends are not funded through debt. Some investors are happier if SPC instead uses that cash to grow the company. The challenge that SPC is facing at the moment is stiff competition for the renewal of power supply contracts. For now, they're trying their best to win contracts and plans to infuse renewable energy into their portfolio. There are no specific details or progress of such plans so everything is speculative at the moment.
That being said, some investors started to liquidate their positions. This can be attributed to the following reasons:
(1) Those who bought at a high price do not find the dividends worth it. Even if the second tranche of dividends is 0.40 PHP/sh later this year, the yield is still low. Moreover, the dividend of 0.40 PHP/sh is speculative and a conservative investor would probably move their funds to a REIT which would have the same or higher yield but with a certainty of payout.
(2) SPC is popularly known as a consistent high-yield dividend stock even before REITs existed in the PSE. SPC hasn't had much growth and they're known to give out most of their earnings as dividends. Now that SPC has lost its claim as one of those "high-yield" dividend stocks, there's no reason to hold SPC shares anymore. They indeed have growth plans but everything is speculative at the moment. The more a company becomes speculative, the more it becomes riskier.
(3) Those who bought SPC at a low price have probably liquidated their positions because of good paper gains. If we think about it, a 30% paper gain is already good enough. That's like 4 or 5 years' worth of SPC dividends. With the current state of SPC becoming speculative, it makes more sense to cash out and move it to another less speculative dividend stock.
Cesar Villegas, an SPC insider sold a few thousand shares a few days before the annual stockholder meeting. As an insider, for sure he knows the state of the business before the public. He was able to liquidate at a profit before the disappointing declaration of the dividends that caused the stock price to dip.
SCC, DMC
The market capitalization of both SCC and DMC continues to increase and investors are keeping track of its progress. Market capitalization is calculated by multiplying the total outstanding shares by the current market price. This matters to both investors and traders because they are positioning themselves for the upcoming PSE index rebalancing. The entire rules for stock to enter the PSE index are not disclosed but the free-float market capitalization is used as a filter. This is done by multiplying the free-float level by the market capitalization. Stocks with the highest free-float market capitalization are the usual candidates for PSE index inclusion. Moreover, a stock should have at least a 20% free-float level to be included in the PSE index.
Though it is still speculative, both DMC and SCC have already met the said criteria and have a free-float market capitalization higher than some of those stocks in the PSE index. We'll have to wait until June 30 as the cut-off date for PSE to start recording the free-float market capitalization as the basis for rebalancing. By then we will have an idea of which stocks in the PSE index will be removed.
A week ago, Maria Gotianun started to dispose of a significant amount of DMC and SCC shares. Maria Gotianun is one of those insiders who helped DMC and SCC uplift the stock price when prices dipped during the pandemic. Many investors did not expect this to happen since Maria Gotianun rarely sells her shares. Is this something to be concerned about? Nobody knows but we can only speculate. We can rule out the fact that SCC and DMC businesses are in trouble since coal, nickel, and energy continues to be in demand. A more logical reason why she sold shares is probably to increase the free-float level of SCC and DMC. We have to take note that the free-float level only accounts for shares that are being held by public investors and exclude those shares held by insiders. If SCC and DMC stock price continues to rise, then for sure the free-float market capitalization of both stocks will significantly increase and have higher chances of going back to the PSE index. Either way, Maria Gotianun only sold less than 1% of her shares for both DMC and SCC. It's a small amount but a significant impact on the stock.
AP
While MER's renewable energy arm is busy making partnerships with businesses going solar, AP on the other hand is not giving up on the competition. AP partnered with Nestle Philippines wherein they will supply renewable energy for Nestle's manufacturing operations. Similar to the businesses that opted for renewable energy, Nestle's objective is to lower energy costs and carbon footprint. AP currently has more than 1,200 MW of renewable energy portfolio. That's approximately 7% of the average daily demand for power nationwide. AP is still committed to targeting its objective to achieve renewable energy as 50% of its portfolio by 2030.
