NB Private Equity has just announced its latest dividend. William Maltby, the chairman said “Today’s announced $22m dividend represents the 23rd consecutive dividend payment to be made to shareholders, taking total capital returned to shareholders via dividends to $338m since 2013. Given the continued strong realisation activity in the portfolio, with $171m of realisation proceeds received in 2023, the board has also increased the company’s existing allocation to buybacks.”
The company has set out its approach to capital allocation which we reproduce below:
New Investments
NBPE’s co-investment model provides flexibility, with new investment decisions being made on a real-time basis, balanced against the pace of realisations as well as other capital requirements. As a result, NBPE can manage its overall investment level without the need for significant unfunded commitments. While the investment level may temporarily rise above or fall below its target for periods of time, over the long term, the board and the manager believe that a target investment level in the range of 100-110% is optimal.
We believe that NBPE’s strategy of investing in high quality private companies and aiming to deliver strong compounding returns over time will drive the best long-term performance for shareholders. New investments should drive long term NAV growth and are also considered in the context of the existing portfolio in order to maintain appropriate levels of diversification. Given NBPE’s objective and the Board’s focus on driving long term returns for shareholders, the board considers new investments to be the core use of NBPE’s capital.
Dividends
The directors remain committed to the company’s dividend policy of targeting an annualised yield on NAV of 3.0% or greater, with the goal of maintaining or progressively increasing the level of dividends over time.
The dividend underpins NBPE’s total shareholder return. It allows shareholders the opportunity to participate directly in the performance of the underlying portfolio and is the primary method of returning capital to shareholders. Since the board implemented a dividend policy in 2013, taking into account the 1H 2024 dividend payment, the company will have returned $338m to investors through a semi-annual dividend.
Share buybacks
The board believes that buybacks can be an attractive tactical use of capital in certain market environments. Inherently, buybacks can represent an opportunity to purchase the company’s shares at a discount to NAV per share, realise a return that is immediately NAV accretive and invest in a portfolio that is performing well and is well known by the manager.
The effectiveness of buybacks in NAV per share accretion, providing liquidity in the shares under certain circumstances and in signaling the board’s confidence in the prospects of NBPE’s portfolio, are well understood by the board.
Increase in capital allocated to existing share buybacks
The company currently has an ongoing share buyback programme with its broker, Jefferies, and has increased the allocated capital to share repurchases. The board regularly reviews the parameters and quantum of the buyback programme for appropriateness in the context of the discount level, position relative to peers, market environment and NBPE’s capital position.
NBPE : NB Private Equity sets out approach to capital allocation