Today, however, I’m sticking to the subject of bottom-line earnings and the focus is on Metropolitan Holdings (Metltd).

At Wednesday’s market close, Metltd’s share price was R13,40. Its historic market ratings were a price-earnings ratio of -24,33, an earnings yield of -4,11% and a dividend yield of just over 7%. The calculation of the first two ratings was made by adding the negative headline earnings per share in the half-year ended June 30 last year to the negative earnings in the second half of the 2008 financial year. The dividend yield is based on dividends per share paid over the same 12-month period.

I’ve often commented on Metltd in past columns and Jean and I hold a stake in the company in our main portfolio. In these earlier reviews, I’ve looked at its investment fundamentals mainly relative to its embedded value and its potential to provide growing dividend income over the long term. Less emphasis has been put on earnings per share.

Headline earnings per share give an accounting perspective because they take into account fair value on assets and liabilities. I will, but hardly need to, remind you that the negative headline earnings per share in 2008 were mainly due to the stock market’s collapse. Headline earnings per share are too volatile to provide a measure of this kind of a company’s operating business.

The company regards core headline earnings per share as the most appropriate measure of growth in its sustainable earnings growth.

Core headline earnings per share, as reported in the 2008 annual report, “exclude items of both a once-off and an inherently volatile nature such as changes to the valuation basis, investment variances and capital appreciation/depreciation”.

In the 2005 financial year, Metltd’s diluted core headline earnings were 95,93c. These rose rapidly to 142,27c in 2007. Growth slowed but still rose to 151,2c in 2008, but the average annual compound growth over the three years was 16,4%.The company distributed dividends relative to these bottom-line earnings. In 2005, dividends were 63c a share and were raised to 95c a share in 2007. In 2008, it maintained dividends at 95c a share. The average annual compound growth in dividends per share was 14,7%.

Last year, it’s quite possible that bottom-line earnings per share were maintained. The trading update for the first nine months of the 2009 financial year shows the company has performed reasonably relative to market conditions. The healthier stock market will have helped to improve asset management fees. At best, I’m looking for little or no improvement.

If diluted core headline earnings in 2009 have come out at 151c a share, on a share price of R13,40, the price-earnings ratio is 8,9, the earnings yield is 11,2% and the dividend yield should still be 7%. But you won’t find these first two ratings on the JSE printout.