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In our 28 July note, Yield (10%, covered and growing) + capital growth, we explored how favourable market conditions mean that CLO vehicles can refinance debt cheaply, enhancing the value of Volta’s equity positions; this is expected to lift total returns by 1%-1.5% p.a. for several years. We noted how it will further increase dividend cover (Hardman & Co FY’21E: 1.8x) and generate capital returns through a growing NAV. The latter, in turn, will see the dividend rise (Hardman & Co FY’23E yield: 10.3%). A high and growing dividend yield, and capital growth, could be attractive to a range of buyers. Despite this favourable outlook, Volta still trades at a 13% discount to NAV.
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