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Deterra (DRR) for franked income.

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    Deterra (DRR) for franked income.

    I placed a question on Deterra this week but since then DRR has made 2 relevant announcements. Offer by DRR to purchase all Trident Royalties plc units on UK AIM Market for cash at 22.5% premium to market price. DRR announced an adjustment to its dividend policy within its existing capital management strategy balancing shareholder returns and capital growth. This will reduce minimum div payout from 100% to 50% to fund future investments. I see that DRR share price has reduced from 4.73 at 3 June to 4.46 13 June.

    Answer

    Hi Peter,

    We touched on DRR in Fridays webinar after the royalty play tumbled ~7%, its largest fall in 10 months after it made an all-cash offer for AIM-listed British lithium mining group Trident Royalties for $277mn. The market clearly voted against its purchase of Trident Royalties for 49p/share.

    • We would not be happy to have been invested in DRR for its consistent fully franked dividend from iron ore to see this change in direction.
    • Buying lithium exposure into current weakness may pay off but it introduces greater risk into what was a relatively conservative dividend play.
    • We think the move will create a transition in the type of shareholder that is attracted to DRR, instead of getting most of the earnings back as a dividend this now looks more like a growth play, and their dividend policy now reflects that.
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    Deterra Royalties Ltd (DRR)
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