3 things that make me want to buy Rolls-Royce shares today

I have watched it Rolls-Royce Holdings (LSE: RR.) Shares are off to a great start. And I’ve been looking for signs that recovery is on the cards.

I’m not trying to get at the bottom to make the most gains. There is too much risk down there, we have seen with some false starts in the past.

I will leave the biggest profits to others. And I won’t buy until things look safer. But there are three things that make me think it might be at that point.

Endurance

In the latest wobble, the FTSE 100 fell 17% from a record high of over 8,000, dropping more than 500 points.

At the same time, Rolls-Royce shares lost only 10%. Which makes me wonder if there is a shift in sentiment.

This time, it is not the same as the market disruptions of the past. Over the past few years, Rolls shares have outperformed the index.

I know it’s a short time to see. And by itself, it doesn’t mean much. But I see good reasons to support mood swings.

Result

Rolls hit by the covid slump. And since then, we’ve all been waiting for one particular turning point. The board predicts a return to positive cash flow by the end of 2022.

What really says it is far from the cold hard numbers in the set of results, though. But now we have it too.

For FY22, Rolls posted £505m in cash flow. I rate it as a solid change from big cash in 2021.

Debt goes down, mostly because of spending. But if the cash flow really returns to stay, we should see it reduce more than the cash of the real profit.

Dividends

The final proof for me is the dividend yield. Now, I don’t expect it to be any time soon. And Rolls himself has not spoken about it.

And, frankly, I don’t want to see companies giving away money right now. Using cash to pay off more debt should be a top priority.

But some forecasts already have the dividend down as soon as 2024. The yield will be less than 1%. And I hope more than anything else.

But I’m glad City are even daring to think about dividends at this stage.

Has Rolls-Royce paid dividends in the last 5 years? Yes, I am very much. And at that time, I think the results can reach a good level.

Verdict

A lot can still go wrong, and the things I say here all come with their own risks.

Rolls shares are still at a high price-to-earnings (P/E) ratio of around 30. So there isn’t much security in case of trouble ahead.

But I think I see a set of positive trends now. And I rate Rolls-Royce share buy for those with a 10-year view. Rolls on the list when I next have cash.