Direct Line knock it out the park on dividends and a capital return of 12% in just over a month.

I will not drone on here as this is a short update post my more lengthy comments on the 1st of July regarding the likely hood that Direct Line would start restoring the dividend along with the publication of their interim numbers today. As I mentioned back then…I can only see limited value in commenting on company announcements and/or news that has just hit the screen, it’s more about anticipating what the next consensus is likely to be and positioning accordingly.

They have knocked it out of the park today on dividends….

"In the light of significant uncertainty from the Covid-19 pandemic, during H1 the Group took the difficult decision to suspend the share buyback and cancel the final dividend announced with the 2019 full year results. The Board has now declared an interim dividend of 7.4 pence (2019: 7.2 pence) alongside a further special dividend of 14.4 pence to replace the cancelled 2019 final dividend. This reflects the Board's continued confidence in the Group's capital position and earnings, the financial performance in H1 2020, as well as some greater certainty around issues that led to the cancellation of the dividend in April."

So they have actually increased the interim dividend compared to last year rather than any token H1 payment and they are paying a special dividend to make up for the final dividend they cancelled for the last fiscal year. It looks like both dividends announced today will probably go XD on the 13th of August.

At its most basic this idea started at 274p on the 1st of June with the possibility of a 6.6% yield. Now as I listen to the H1 conference call the share price is 329p (a capital return of 12% in just over a month) and they are about to go XD 21.8p which would be a yield 6.6%....but at the higher share price.