Luckily, you’re probably not a shareholder in Coca-Cola HBC. Unless, of course, you’ve got a FTSE100 tracker, in which case you may wish you weren’t. HBC, of course, stands for Hellenic Bottling Company, and the company has as much to do with the UK as those miners with the alphabet soup names which infested the index during the commodities boom.

HBC is in London’s main index by default, having departed its original home on the Greek market because it was becoming the Greek market index. In September 2013 it decamped and came to town, its market value of £6.5bn propelling it straight into the FTSE100. It looked like an expensive misfit at the time, and so it has proved. From over £19 then, it’s been downhill only to today’s £11 a share.

It’s still not obviously a bargain, although one tries to be sympathetic. Over one-third of HBC’s sugary fizz goes to Russia and Nigeria. Rotten luck that both have gone, well, flat, almost overnight. The brokers at Cazenove reckon the countries’ woes will wipe 27 per cent off this year’s earnings. Merrill Lynch, who never liked the shares, add the risk of Coca-Cola raising the price of the gloop or even removing a territory or two from HBC.

Contrarians might argue that after such a fall, all this is already discounted, except that the price is still 19 times the Caz estimate, not far out of line with the “consumer staples” sector. With sugary fizzy drinks getting the sort of publicity that once softened up the tobacco companies, Coke may one day not look like a “staple” at all. Still, you never know. Perhaps Warren Buffett will decide to add HBC to his Coca-Cola holdings.

They would say that…

Stockbrokers need buyers of stocks, so the argument  from Merrill Lynch that shares paying “safe” dividends could double from today’s prices brings to mind the famed comment attributed to the late Mandy Rice-Davies. In truth, the brokers’ list is a pretty rum one.

At the top is Roche, the Swiss pharma giant. AstraZeneca is not far behind, but there’s no mention of GlaxoSmithKline. British American Tobacco (still listed as a “staple”) is the lone maker of death sticks while British Land, Land Securities and Hammerson prop up the table, despite the “low” risk to their dividends. There are no miners or British banks.

Yet the brokers may have a point if their prediction of 2015 being the year of negative yields is right. The Swiss charge you to look after your money, the Germans pay nothing, and index-linked bonds already guarantee buyers will lose money in real terms. Long bonds return less than 2 per cent, and at the shorter end, negative-yielding bonds are the world’s fastest-growing asset class.

By contrast, safe dividend stocks yield almost 4 per cent, and they are already tending to behave like bonds. Merrill’s argument is that the market could drive the prices until they have yields to match. However, a safe dividend needs a business that is sustainable and profitable not just for a few years, but over the decades, or more than the entire life of some quite substantial companies. Despite its wobbly dividend record, Marks & Spencer is on the list. Woolworth, of course, is not.

 

All Helge let loose

 

These are grim days for companies and individuals who had got used to $100 oil. Attacking the cost base is the new black (stuff) so projects are being canned and experienced workers fired. Few oil majors are under greater pressure than BG Group, with its debt-funded commitments to expensive deep-water drilling 150 miles off Brazil and its vast LNG plant in Australia.

So results day on February 3 promises to be uncomfortable for the company and its new chief executive, Helge Lund, headhunted at great expense and terrible timing from Statoil in October.His first pay package was shouted down, but even the second (trimmed to avoid the need for ratification by shareholders) looks increasingly inappropriate in the brave new world of sub-$50 oil. The shareholders really wouldn’t mind, Helge, if you pared it down again. It would make the pain you’ll inflict on your new colleagues a little easier to bear.

This is my FT column from Saturday

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