How Royal Mail delivered first class returns
ROYAL Mail is the most widelyheld stock in the FTSE 100, with some 20 per cent of the company owned by more than 500,000 individuals and employees.
Staff were gifted stock when the company floated in October 2013 – everyone else paid 330p a share. Today, the price is 505½p, having reached a high of 631p six weeks ago, just before the annual results were announced.
The figures showed a 2 per cent rise in turnover to £10.1 billion and a 4 per cent rise in the dividend to 24p, but profits fell sharply to £212 million. Outgoing boss Moya Greene said cost pressures would remain high this year, while new data protection rules, which came into force in May, might affect letter volumes as firms cut back on unsolicited mail. The economic environment could also hit Royal Mail, as consumers and firms try to reduce expenditure.
Royal Mail hopes to offset falling letter volumes by expanding its parcel division here and overseas, particularly on the Continent, where business is thriving.
Pessimistic brokers focus on cost pressures and competition. Optimists look at Royal Mail’s progress with the unions, its increasing use of technology to improve productivity and its dividend, forecast at 25p for the year to March 2019, putting the stock on a yield of almost 5 per cent. Midas verdict: The Government was criticised for selling Royal Mail on the cheap back in 2013 and some lucky shareholders who managed to get in at the right price have benefited from its largesse. Investors have received 103p of dividends since flotation. The outlook is uncertain but now is not the time to sell, particularly for income-seekers. Hold.
Traded on: Main market Ticker: RMG Contact: royalmailgroup.com or 03457 740 740