Royal Mail PLC Could Help You Retire Early

Retirement may not be so long away for shareholders in Royal Mail PLC (LON: RMG). Here’s why…

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royal mail

While much of the focus in 2014 looks set to be on which companies are able to grow their bottom line at an above-average rate, a decent income is still likely to be important for Foolish investors.

Indeed, Bank of England Governor, Mark Carney, has repeatedly stated that interest rates are not going up anytime soon. This is despite the market seemingly pricing in an interest rate rise some time before the next election.

So, with interest rates remaining at historic lows, bank accounts offering next-to-nothing and inflation being a threat (albeit less so than last year), stocks that offer decent dividends could find themselves bid up to higher highs.

One company that continues to offer a relatively attractive yield despite its share price going through the roof in the last six months is Royal Mail (LSE: RMG). It comes with a yield of just over 4%, which is over 0.5% higher than the current yield on the FTSE 100.

Furthermore, Royal Mail apparently continues to benefit from strong market sentiment. As mentioned, shares have posted highly impressive gains since the shares listed in October 2013 — making gains of almost 80% in total.

Of course, there has been considerable argument as to whether the shares were underpriced. However, shares continue to significantly outperform the wider index, being up 4.9% year-to-date versus a fall of 0.2% for the FTSE 100 over the same time period.

So, while an initial spike in share price could be explained away by a mispricing of the IPO (initial public offering) in October, the fact that shares continue to enjoy strong sentiment shows that it is more likely to be market sentiment (as opposed to an initial mispricing) that is pushing them to fresh highs.

This is good news for investors in Royal Mail because the business, as well as the shares, seems to be making strong progress. As highlighted when the company listed, Royal Mail is going through a significant change where it is moving away from a reliance on letters for its revenue and is instead focusing on growth in the parcels business.

With demand for parcel delivery being seemingly insatiable (thanks in no small part to the internet), Royal Mail could offer attractive long-term growth prospects.

This growth potential, allied to a yield of over 4% and the previously mentioned strong market sentiment, mean that Royal Mail could help to bring retirement a step closer.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Peter does not own shares in Royal Mail.

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