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Royal Mail: divi or growth stock for 2014?
by Danielle Levy on Dec 09, 2013 at 14:43
‘The [industry’s] return profile and margins are quite low and there is still quite a lot of pressure on those going forward, which could mean an uncertain future,’ he said, adding that this could affect the ability of the company to pay out dividends.
Still to deliver
Although Royal Mail’s substantial share price rise from 330p to 550.7p can be applauded, it has ultimately lowered the dividend yield. Justin Cooper, CEO of shareholder solutions at Capita Asset Services, is keen to point this out.
‘Royal Mail posted a good set of maiden results as a private company, but shareholders who were hoping for a dividend didn’t read the small print of the prospectus which made clear they will have to wait until the full-year results, when the company expects to pay out £133 million.
‘That is still on track for next year, but with the share price having roared ahead since the IPO, it means Royal Mail is now providing a lower yield than quite a lot of the UK’s largest companies.’
It is for this reason that one fund manager who bought into the IPO on the prospect of a decent yield has since sold out. They said the yield, around the 3% level and down from the 6% notional yield at flotation, was no longer high enough.
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