Stock Purchase: Chesnara

On Monday 26th January 2015, I bought 276 shares in the Life Insurance company Chesnara. The share price at the time of purchase was 351.51p per share. The total cost with charges included £970.17

Unlike my recent purchases of Rio Tinto and PetrofacThe average yield over the last 5 years has been well above the target I look for of over 3.5%, with a stonking 7.86%. Their yield is currently at 5.15%. The yield has been consistently high for years. I have a breif example to demonstrate it’s ROI.

You could buy Chesnara in January 2009 for 115p per share. If you had kept your investment until today (6 years), you would have received 90.85p in dividends per share, which would represent 79% of your initial investment in income alone. Not to mention tripling your money in capital growth. Now that’s a nice ROI!

The companies P/E Ratio is currently at 7.96It’s worth noting that the P/E ratio was 6.80 at the end of 2012, and 7.50 at the end of 2013. I usually look for companies with a P/E ratio below 20. 


The dividend payment has increased every year it’s been on the stock market, which dates back to 2004. Over the last 5 years the average dividend growth rate was 2.83%. The most recent increase was 3.05%. This growth rate has been fairly consistent from when they initiated over 11 years ago. It’s a little lower than what I normally target (6%). 

Their average dividend cover has been a very consistent 1.99 over the last 5 years, and for the previous financial year, the dividends were covered by 2.4

I’ve received some of my best returns from Non-life Insurance sectors last year. I’ve wanted to buy shares in a Life Insurance company to diversify my portfolio further. When I was comparing the companies within this sector, Chesnara’s value and high dividend payment stood out to me. I’m not expecting substantial capital growth, but they’ve shown that since 2004, they’ve been able to grow at a steady rate whilst returning high dividends which rise every year.


£30,000 Investment Pot

I’m pleased to say that now I’ve invested in Chesnara, my NISA and Taxable account have surpassed the £30,000 marker for the first time. £20,000 to go this year now. Gulp!

The recent boost in capital has been from a Regular Saver payout I had with First Direct. I saved £300 a month for 12 months, and they paid 6% (before tax), as long as I didn’t draw any money out. Unlike most consumers, I chose to invest the lot back into shares once I received the payout. The payout was just short of £3,700. I had some additional money (£800) to invest with from my January wages too. As I’m still developing my portfolio, I wanted to diversify it further and buy shares in a number of companies. I decided on 4 purchases. The downside to this decision has been absorbing the broker fees, but I was more comfortable with having 4 companies to spread the risk out. The last 2 purchases (Petrofac and Chesnara) have been in my iWeb taxable account and the broker fees are comparatively lower at £5 per deal rather than £11.95, so I was more comfortable in investing with less than £1,000 each.


What do you think of Chesnara? Are you a shareholder? What companies would you have bought in my situation?

0 Comments

  • Anonymous

    Reply Reply 29th January 2015

    Huw

    That is a coincidence. I have been looking at Chesnara over the past few days and just this evening doing some more in depth analysis. For now I am sitting tight as the price is nearing a resistance level that it has bounced from three times before (beginning of 2014, end of September and beginning of this year ).

    I was interested to see that you paid 351.5p for these on Monday 26th. Is this the actual price you paid or is it including your charges? From the data I have down loaded and was analysing this evening the high of the day was 348p. Maybe this is how iWeb get away with only £5 per trade. I will have to do some further investigation before I decide which brokers to go with in the next financial year.

    Richard

  • Huw Davies

    Reply Reply 29th January 2015

    Hi Richard,

    How strange! Great minds though…….

    Thank you for raising that point on the share price. I went into my account and double checked. I hadn't realised, but the price I quoted on my Blog per share was including charges. I looked at my trading history and the price was actually 347.96p per share. I'm sure they couldn't manufacture the share price legally, but you had me worried for a moment.

    Thanks for checking and I hope you're able to get good value from them in the near future.

    All the best
    Huw

  • Tawcan

    Reply Reply 29th January 2015

    Can't say I know much about the company but at over 5% yield that seems pretty good to me. Hopefully the payout ratio isn't too high.

  • weenie

    Reply Reply 30th January 2015

    Hi Huw, way to go with passing the £30k marker! What a great start to the year! I don't anything about Chesnara but good luck with them!

  • Huw Davies

    Reply Reply 30th January 2015

    Hi Tawcan, yes the yield is outstanding and that was the main draw for me. Based on the last financial year, their Dividends per share were 17.88, and their earnings per share were 42.98. So, the payout ratio was 0.416. This is higher than most of the sector, as many don't pay dividends or very high ones anyway.

    Thanks for stopping by
    Huw

  • Huw Davies

    Reply Reply 30th January 2015

    Thanks Weenie!

    I'm really pleased with getting past that marker. I've now got to put another £20k on top of that for 2015 – Yikes!

    I'm pleased with the purchase and I'm hoping to be a long term investor with them.

    Cheers
    Huw

  • No More Waffles

    Reply Reply 30th January 2015

    Huw,

    Thank you for putting Chesnara on my radar. Will definitely check them out.

    Also, huge congrats on passing the £30,000 threshold for the first time! Good luck getting to £50,000 this year, but I'm sure you'll do great.

    Keep it up,
    NMW

  • Huw Davies

    Reply Reply 1st February 2015

    Hi NMW,

    No problem at all. I think they're at least a company to keep an eye on.

    Thank you for the kind words! I'm really pleased. I still have a long way to go, but I seem to be heading in the right direction. Thanks for stopping by!

    All the best
    Huw

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