Shares in Bendigo and Adelaide Bank Ltd [ASX:BEN] enjoyed some solid support in today’s flat stock market. The stock closed up more than 1.5% to finish not far off a six-year high. BEN shares have achieved a rolling two-year return of nearly 70%…even more when you include its healthy dividends.
This morning the company announced its plan to raise $200 million by issuing hybrid securities to investors.
A hybrid security is one that has characteristics of both equity and debt. In this case, the hybrid will be a preference share.
The product will pay investors a dividend every six months, which is a set margin over the bank bill swap rate. The company can choose to convert each hybrid security into an ordinary share, subject to certain trigger events.
If Bendigo and Adelaide Bank happens to go bust in the next eight years, hybrid holders will rank ahead of ordinary shareholders in the queue for return of capital.
Free Reports:
Bendigo and Adelaide Bank is raising money this way to strengthen its balance sheet. Part of the proceeds will fund the redemption of an existing hybrid issue, but the remainder will enhance BEN’s flexibility to pursue growth opportunities.
Investors can see a variety of potential consolidation opportunities in the Aussie financial sector, and this issue may provide some firepower for acquisitions. That’s why the market has bid up the BEN share price today.
Bendigo and Adelaide Bank has successfully consolidated several financial businesses over the past few years. Profits and dividends have been on the rise, and today’s hybrid issue will give the company plenty of options to keep the ball rolling.
You should view Bendigo and Adelaide Bank as an interesting alternative to an investment in Australia’s big four banks.
Cheers, Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator
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