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Time to pass the parcel on the Royal Mail

By Chris Bailey of Financial Orbit | Saturday 6 January 2018


Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


 hope over the festive period all your Christmas cards and parcels were both received and sent successfully.  Personally I still await the successful delivery of a book I self-gifted...but rather than turn this into a self-centred rant I thought we would talk about the Royal Mail (RMG).  
 
Back on the final day of August I loved up this one on the basis that falling out of the FTSE-100 was more of an opportunity than a threat for a dividend-heavy, sensible balance sheet stalwart.  Over the last few months this has worked out rather well after a slightly sideways start as some of the City scribblers worried about the (ultimately non-existent because of legal restrictions) threat of industrial action by postal workers over Christmas.  As I noted back in late August there is typically value in having a look at the stocks falling out of an index inducing the blunt instruments known as tracker funds to change their positionings.  
 
Royal Mail shares - along with many others in the market - enjoyed a good end to 2017 / start of 2018.  Normally a shift in its shares at this time of year would reflect optimism about the number of parcels the company has successfully shifted over the Christmas period (parcels being the key at-the-margin business for the group as the letters franchise inexorably declines). 
 
Frankly I have no idea how they have done but given some of the structural growth trends in e-retailing along with their international logistical prowess I am sure they have lived up to their stalwart rating.  You get to learn how to survive successfully after 502 years in business after all.  What has additionally helped are recent press rumours that 'confidence was growing a deal could be struck to avoid industrial action after a fresh round of talks'.  
 
Good for them - and frankly the unions are fighting a bit of a losing battle as technology is changing the business model as in so many sectors (of course there will always be a role for the 'last mile' deliverer...until they get the drones working properly!!)  From a share perspective however the easy trading money has been made as the sentiment gap has been filled and the shares are back at a more sensible double-digit ratio.  With that attractive 5% odd shareholder remuneration and good balance sheet there is no reason for dividend munchers to be too concerned but for those of us who are more interested in total returns it is time now to pass the share parcel and take some profits.  
 
Meanwhile...i'm still grumpy about that missing book.  


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