Parcels fuel £100m Royal Mail dividend

ROYaL Mail is set to deliver a £100m dividend as it reaps huge profits from delivering parcels during the pandemic.

It will hand shareholders – including tens of thousands of posties – a 10p-pershare payout as it remains on course for annual profits of £700m.

It is a welcome boost to cash-starved savers after a year of dividend cuts by top firms. and it comes after an extraordinary 319pc rally in Royal Mail’s shares in the past year, with the service on track for a return to the FTSE 100 if the good fortune continues.

Its stock was changing hands for as little as 119p last March but yesterday closed at 520.4p.

The dramatic turnaround has paid off handsomely for number one investor Daniel Kretinsky – the billionaire dubbed the ‘Czech sphinx’ – who bought shares while they were languishing and now owns a 15pc stake worth £775m.

Royal Mail has been battling a collapse in letter volumes for years, but had struggled to boost parcel deliveries to cover the drop in revenues. That changed last year when lockdowns closed high street shops and drove consumers online, causing demand for internet-ordered deliveries to rocket.

Christmas was its busiest ever, as it shifted a staggering 496m parcels in the final three months of 2020 – 110m more than the same period the previous year. That has lifted Royal Mail’s annual UK revenues by £900m to an expected £8.6bn.

On top of this, a peace deal reached with the Communication Workers Union has avoided strikes, clearing the way for modernisation plans. The special dividend comes after it previously suspended the payout to conserve cash during the crisis.

The most recent dividend of 7.5p was paid in January 2020.

a new dividend policy will be detailed in Royal Mail’s full-year results in May.

Separately, its European parcels business GLS expects revenues to grow by 12pc annually for the next five years, eventually hitting operating profits of about £427m.