Long-term investors buying Royal Mail shares
in its flotation should do so for the company's dividend yield of up to 7.7 per cent but they need to watch the stock closely, the Mail on Sunday's Midas column advised. More nimble investors could make quick gains because the shares are likely to be priced to rise when trading starts. Chief Executive Moya Greene has managed to restructure Royal Mail while gaining the confidence of workers, and the business is gaining from increased productivity and shoppers buying online. Analysts expect revenues to keep rising, providing support for the dividend.
Stick with Tate & Lyle, the Telegraph's Questor column said. It is no longer in the sugar and syrups business and instead makes most of its money from bulk ingredients, in particular corn-based sweeteners for fizzy drinks. A cold US summer reduced demand for these products and first-half profits are set to dip below last year's. But falling corn prices have boosted margins and Tate expects solid second-half demand in the US. With growth prospects in specialist ingredients and a 3.5% dividend yield covered twice by earnings and cash flow it's a reasonable investment.
WH Smith defied gravity under previous Chief Executive Kate Swann, cutting costs to offset revenues hit by consumers' move online for newspapers and books, the Sunday Times's Danny Fortson said. The retailer's annual results on October 10th will be the first for new boss Stephen Clarke. Smiths is expanding in Russia and China but those are long-term prospects. In the meantime, Clarke may choose to break up Smiths by splitting the retail arm from operations at airports and train stations. The shares look a safe bet for now.
Buy Energy Assets, which installs gas meters for industrial customers, the Telegraph's Questor advised. The company funds its meters with debt but the meters last more than twice the life of the debt. This means at some point Energy Assets will be debt free and highly cash-generative and in the meantime its fees are guaranteed to rise with retail price inflation. The Aim-listed stock is risky but a small investment should yield returns in the long run.
Investors seeking income should apply for the flotation of Foresight Solar Fund, Midas said in the Mail on Sunday. The Government wants solar energy to play a greater part in UK supply. Foresight will offer shares at 100p with a dividend of 6p rising with inflation. The investment firm has been in green energy and other infrastructure for almost 30 years and has a good record. The flotation is similar to recent wind fund share sales but solar energy is a more predictable bet than wind because plants get less opposition. The shares, available until October 15th, are a good long-term bet.
BP is in legal limbo as the Gulf of Mexico continues to hang over its shares, Danny Fortson said in the Sunday Times. A US court sided with BP last week and ordered tighter criteria for compensation payouts but it may be next year before a New Orleans judge decides whether to impose tens of billions of pounds of damages. For now, investors are right to view BP as a court defendant rather than an oil company.
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