Ann: Dividend/Distribution - VUK, page-35

I thought I'd do a really simple analysis based on earnings and multiples to consider too_much_boost's question about how high we can go. I'm not claiming it should be highly accurate but it was quick and simple, and better than nothing.

The left side of the table is forecast EPS and DPS for FY23 and FY24 for the asx-listed retail banks, as published by Commsec (for however reliable or unreliable a source that is). The DPS numbers are grossed up to include the franking credits the Aussie banks come with.

The right side of the table is the multiple that that bank trades on based on the differetn EPS/DPS numbers, and the bottom row is what VUK's SP would be right now if it traded on the same multiple as the average of the other listed banks. You can see CBA is really in a different stratosphere to the others, so I excluded it from the average.

VUK will always look expensive on a yield basis as the franking system encourages Aussie companies to pay out more. For that reason I think the 'DE' multiple (the inverse of yield) is not a good metric to for comparison, but I thought it was still interesting to include since a lot of Australian retail shareholders do buy for yield, especially people who buy bank shares, so I thought it was worth observing that VUK will never appeal to retail buyers on that basis and so will likely always trade at a slight discount to its peers.

It's just a bank-of-envelope kind of calculation, but it does make Thee Bull Shepherd's $5 call look fairly reasonable. Certainly $4+ seems like it should be a near-certainty if VUK doesn't suffer any significant bad news. From macro commentary there seems to be more concern about a sharp economic downturn in the UK than in Oz, so that is a factor that probably weighs on the SP by 1) keeping VUK trading at a discount to ASX peers due to UK uncertainty, and 2) possibly eventuate as actual bad news for VUK at some point.