A week ago, I wouldn’t have believed I’d be here today writing about a FTSE 100 that’s since fallen to barely above 6,500 points. That’s a massive 11.5% drop.
I see a handful of 10% fallers Friday. I’ve picked three I think are unfairly depressed, and I’ve added them to my potential buy list.
Dividend champion
My fist pick is City of London Investment Group (LSE: CLIG), which is one of the best dividend payers out there. The investment manager handed over 27p per share last year for a yield of 6.7%, and that was just the ordinary dividend. There was a special dividend of 13.5p per share on top of that.
Analysts are forecasting an ordinary dividend of 29p this year. Now, the share price has plunged by 14% over the past week, meaning the 29p would produce a yield of 7.4%.
City of London does mainly specialise in emerging markets, and there might be fears that the coronavirus contagion could hurt those disproportionately. But I don’t see any clear predictions regarding likely demographics of the infection, and I think the price fall is overdone.
City of London its also moving to invest in developed markets and in real estate too, and I’m seeing a long-term income buy.
Property
Next up is property developer U and I Group (LSE: UAI), and I’m upbeat about its prospects as it keeps winning impressive new contracts.
Even before the coronavirus panic escalated, U and I was being hit by the property blues. The double whammy has pushed the shares down 13% on the day at the time of writing, and they’ve fallen 18% over the course of the week.
Perhaps there are worries that work at development projects might have to be halted due to quarantine fears. If that happens, U and I could suffer some impairments in the current year. But again, I really don’t expect to see any long-term hit to this kind of business.
I don’t think there’s much chance of a dividend cut, as the firm is in a phase of returning surplus capital. And the share price drop has pushed the forecast dividend yields up to 6.5% this year and 7.2% next.
Investment trust
My final pick is the Schroder UK Mid Cap Fund (LSE: SCP) investment trust. As its name suggests, it invests in mid cap stocks, together with small caps, and aims for a total return in excess of the FTSE All Share index.
I guess investors fear smaller companies are more likely to be damaged by any coronavirus fallout, and that’s presumably why they’re dumping this trust.
Since the market closed at the end of last week, we’re looking at a 19% price fall, so what’s that done to the valuation? Investment trust shares are typically priced in relation to the value of their underlying assets, and typically trade at a small discount to that (though they some sometimes reach a premium).
The trust’s current net asset value per share (NAV) stands at 660p, and that puts the shares on a 20% discount. The NAV might fall, but I think the sell-off is overdone.