Groundworks and geotechnical specialist Keller (LSE: KLR) shot higher today on the release of a positive trading update. As I write, the shares are up around 10%, adding to the general stock market rally we are seeing.
It’s music to the ears of every shareholder. Trading has been better than the directors’ expectations and nowhere near as poor through the coronavirus crisis as many feared.
Participating in the stock market rally
The update covers trading in 2020 so far, and it’s good news. I last reported on Keller on 23 April when the firm issued an earlier update. Back then, the company said first-quarter trading had been better than expectations but Covid-19 affected operations during the second half of March.
The share price drifted a little higher over the weeks following, but investors needed to know more about how things were going. And today, we learn that trading through the second quarter has been “resilient.” The directors said the pandemic has not affected operations as much as they previously anticipated.
Keller operates in many countries around the world and there have been regional variations. But overall, “the vast majority” of sites where the company is working have remained open.
Meanwhile, the shareholder dividend relating to last year has been on hold. But today, the directors announced it “both prudent and appropriate” to maintain the full-year dividend at the prior year’s level. So that’s a payment of 35.9p in total for 2019.
To add context, it reckons the decision reflects the ongoing financial strength of the company, along with its “significant” liquidity position, and trading during the first half of the year. On top of that, the directors have confidence in the longer-term performance of the business.
An impressive dividend record
And Keller’s record on dividends is impressive. Today’s decision continues the progression of the payment to shareholders. It’s been maintained annually or increased every year since 1994. The company operates in a cyclical sector. But I think the dividend performance underlines how well the firm has been growing too.
With the shares at 690p, the historical dividend yield is just above 5%, which strikes me as being attractive given the long record of dividend growth. However, the directors have postponed the decision about the 2020 interim dividend. They will not deliver their verdict about the payment in August with the results, but will defer reviewing the situation until later in the year.
Looking ahead, the directors said in the update they are “cognisant” of the potential impact of an economic slowdown on construction markets. Weaker economies could affect the “volume and quality” of the order book in the fourth quarter and beyond. So, they are not offering any guidance on earnings, in common with many other firms right now. Naturally, though, the directors remain “confident” in the medium-term prospects for the company’s key markets.
I reckon Keller is well placed in the niche it serves and the firm tends to surprise to the upside. On balance, I think the FTSE SmallCap company’s shares are attractive now.
