Shares digital

Prodesse Investment (PRD) – Finals PTP: £10.7m (-£11.8m) Divi: 29.0p (24.0p)

As it gets worse and worse for the US economy, things just keep getting better for Prodesse. The borrowing costs of the investor in American mortgage-backed securities are directly linked to the Fed rates. During the fourth quarter these fell from 5.25% to 4.25% and that meant the business saw net income per share increase 20% from 20c to 24c. Since then, however, there has been an emergency 75-basis-point cut in Fed funds followed by another 50-basis-point cut at the regular January meeting of the Federal Open Market Committee (FOMC). That 30% fall in rates is going to feed right through to Prodesse’s bottom line and mean more dividend hikes this year (the Q4 dividend was up 30% on Q3 at 21c versus 16c.)

Shares says: The mortgage-backed securities it invests in are effectively guaranteed by the US government and the January cuts in Fed funds is not in forecasts.

by: Simon Keane