The past few years have been brutal for shareholders in Rolls-Royce Holdings (LON: RR). Rolls-Royce shares took a savage beating during the Covid-19 crisis, but have rebounded by a quarter in the past six months. And I can think of one potential piece of good news that might light a fire under the stock.
Rolls-Royce shares have a rough ride
Long before coronavirus tanked global markets, Rolls-Royce shares were riding high. On 3 August 2018, this popular stock closed above 375p. Eighteen months later, in spring 2020, shares in the famed engineering firm bombed harder than the wider market.
And when air travel was banned or restricted during lockdowns, the Rolls-Royce share price plummeted. In late September 2022, the stock briefly dived below 65p, but has since bounced back strongly.
Here’s how this popular and widely traded stock has performed over seven timescales, based on the current price of 107.2p:
| One day | -2.1% |
| Five days | -1.7% |
| One month | 0.0% |
| Six months | +25.0% |
| One year | -8.9% |
| Five years | -62.5% |
Even after some recent weakness, the Rolls-Royce share price is up nearly 15% so far in 2022. But despite its strength over the past half-year, it has slipped almost 9% over 12 months. Also, it has crashed by more than three-fifths over five years. Yikes.
In short, this has been one volatile and unpredictable stock. Even so, at the current share price, this FTSE 100 firm’s value is almost £9bn. Plus, I’m still gutted that I didn’t buy into this Footsie stock when it was clearly a dirt-cheap bargain during its autumn lows.
2022’s result are due on 23 February
As Rolls-Royce shares have not paid any dividend since 3 January 2020, they offer no cash yield for now. But the group’s 2022 full-year results will be released in nine days, on 23 February. Only then will we find out how much profit the company made last year.
Personally, I’m expecting Rolls-Royce to have eked out a small profit last year, maybe around £50m. Also, I hope to see positive signs of earnings recovery, as well as ‘modestly positive’ cash flow in 2022. Then again, the group’s balance sheet was weighed down by £5.1bn of net debt in mid-2022.
With air miles flown recovering strongly in 2022, I’m also expecting some positive guidance from the group’s crucial civil aviation division. This sector could get a post from China’s post-lockdown reopening. Also, its defence arm could be boosted by higher military spending by western governments.
Good news could be on the way
Looking ahead, I can see one particular piece of good news that might just light a fire under Rolls-Royce shares. As I wrote earlier, the company has not paid a dividend since early 2020. But what if new chief executive Tufan Erginbilgic decides to reinstate the firm’s cash payout in late 2023 or early 2024?
For me, reinstating Rolls-Royce’s dividend would be a big vote of confidence. It suggests that the group was finally turning around by consigning the pandemic firmly to the past.
To sum up, if (or when) Rolls-Royce starts paying out cash dividends again, I think this could fuel a new bull run (positive momentum) in the shares. So I’ll keenly watch for any developments in next week’s announcement!
