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Learning, Sharing, and Teaching => Investor Alley => Topic started by: theadvicist on January 07, 2016, 07:37:53 AM

Title: UK Investors: Anyone looking at DX?
Post by: theadvicist on January 07, 2016, 07:37:53 AM
I've been keeping my eye on DX since their share price kind of collapsed when their annual results were published.

Here's a link so you know which company I'm talking about

They seem fairly well poised for the long term - they've invested heavily in digital technologies, and are streamlining their distribution centres.

But, I've had the pleasure of using them for passport delivery, and they were useless, so that puts me off. Plus, I just think handling 'goods' is a dying industry. Unless you have the Amazon contract post seems to be going down. And soon, we'll all be printing consumer goods at home in my mind.

Anyway, what's tempting is the dividend yield. Shares are currently c. 18p and the divi last year (and the year before, if you take into account it was only floated for a third of the year) was 6p!

I've tried googling and looking for any info on the 'dividend objective' I saw mentioned (but not defined in any way) in the annual report. I cannot find what is meant by that phrase. I'm also not sure what typically happens when a company's share price tanks, but income / profit seems relatively stable.

 Anyone have any ideas / thoughts on whether the dividend will take a hit due to the lowering of the share price? I'm new to the this game, so curious to hear what people think.
Title: Re: UK Investors: Anyone looking at DX?
Post by: cerat0n1a on January 07, 2016, 01:55:16 PM
My honest reaction is to think "bargepole" :-)

Sure, the yield is enormous, the PE ratio is tiny, but why aren't the directors buying at these prices? If the business survives, without a heavily discounted placement, you could do very, very well, but it's priced by the market as if it's going to the same way as City Link (whose assets they bought from the administrators last year). In particular, the city absolutely hates it when you get a statement from the CEO saying that things are going well followed by a major profit warning a few weeks later - it's often taken to indicate incompetence or dishonesty.

I thought they'd already announced a dividend cut (but the forecast still has them on 10% yield I think). I don't think it's that delivery of goods is a dying business, more that Royal Mail is giving its smaller competitors a good kicking; it's a business where scale really matters.
Title: Re: UK Investors: Anyone looking at DX?
Post by: theadvicist on January 08, 2016, 01:38:31 AM
Thanks Ceratonia! I agree that the CEO's statement was really positive, strange given what's gone on. I guess I didn't take his, "we're positioned well for the future" with enough salt. I've got to remember he is marketing the business to investors, not just producing a factual statement.

It will be interesting to see how the mail industry sorts itself out; I've noticed Royal Mail making significant efficiencies but then they seemed rather bloated to begin with. They do seem like a very hard business to compete with, since they are going to every address regularly anyway.