Well, what a total letdown that was.
After studying the 447-page prospectus, producing my own valuation sums and writing two Collectives on the subject…
…my application to buy shares in Royal Mail (LSE: RMG) failed abysmally.
A £300-plus profit from your initial £749.10 investment
Yes folks, I was one of the 36,000 stags investors who applied for shares worth more than £10,000…
…but was then snubbed by the government and ended up with nothing.
I hope you fared better than me in what must surely be the most frustrating flotation fiasco since lastminute.com…
…when 189,000 dotcom punters were issued with just 35 shares worth £133 at the height of tech bubble in 2000.
If you did receive 227 Royal Mail shares, well done – the price has since rallied from 330p to beyond 480p…
…giving you a near-£300 profit from your initial £749.10 investment.
That’s a pretty good return in less than a week.
And don’t forget, you can also look forward to a £45.40 annual dividend. Wow-wee!
I now have surplus Royal Mail funds burning a hole in my portfolio
According to my sums, about 730,000 spivs investors pledged an amazing £4bn to buy Royal Mail shares.
Some 93,000 received the minimum £750 worth of shares they applied for…
…leaving around 637,000 other Royal Mail speculators investors with more than £3bn of spare cash to invest.
So if you – like me – now have surplus Royal Mail funds burning a hole in your portfolio… what now?
I am not rushing to invest now – even for 227 shares
I suppose you could always buy Royal Mail shares on the open market at the higher price.
However, I am not rushing to invest – even for 227 shares.
You see, at 460p, I reckon the shares are valued at 10 times my profit estimate and should yield a 4.2% dividend income.
Furthermore, a fair bit of the price now reflects the group’s surplus property assets, which I believe could be worth 120p per share if or when they are sold.
For me at least, the obvious value upside of Royal Mail has all but evaporated. So the underlying business now needs to progress for the price to really outperform from here.
With that in mind, I expect the first task for Royal Mail’s managers is to ensure their staff do not vote for strike action and walk out later this month…
I’ve scoured the market and put these 6% incomes on my own radar
The other option for me – and the other 636,999 peeved Royal Mail gamblers investors – is, of course, to hunt for some different bargains.
True, Royal Mail’s 6% yield at the 330p flotation price may have quickly disappeared, but there are other large caps with super-juicy incomes to savour right now.
In fact, I scoured the market at the weekend for alternatives to Royal Mail and have put these shares and their 6% incomes on my own radar:
6% yield opportunity 1: Admiral
During the last twelve months, Admiral (LSE: ADM) has distributed payments totalling 94.4p per share. So the shares at £12 thus offer a trailing 7%-plus income – which looks very nice to me.
However, the car insurer does pay out almost all of its earnings as dividends, so the payout could be easily cut if profits do stumble.
Nonetheless, the business has prospered during the recession, with profits and the total dividend both climbing an impressive 70% between 2008 and 2012.
6% yield opportunity 2: Amlin
Here’s another high-yield insurer, although Amlin (LSE: AML) is one of those Lloyds operators that offers insurance to cover hurricanes and the like.
Anyway, the trailing payout is 24.3p per share, which gives a 6% income at 405p.
As you’d expect from a catastrophe insurer, reported profits have been up and down over the years, with a loss actually reported for 2011. So there is a bit of added unpredictability here.
Even so, the dividend was covered twice for 2012 and has advanced 60% between 2007 and 2012 without any setback.
6% yield opportunity 3: SSE
SSE’s (LSE: SSE) plans to lift its gas and electricity prices by 8% should help the utility’s near-term dividends.
Indeed, the group is committed to lifting its annual dividend by the RPI measure of inflation, and is therefore on course to pay 87p per share for the current year. That projection supports a 6% income for buyers at £14.
SSE has a very reliable dividend history – the firm has lifted its payout every year since its 1999 formation. And between 2008 and 2012, the dividend was increased a worthwhile 32%.
6% yield opportunity 4: ICAP
Inter-dealer broker ICAP (LSE:IAP) recently declared a 22p per share annual payout and therefore yields 6% with the shares at 364p.
But ICAP has had its difficulties, with underlying earnings sliding 18% last year as the company’s traditional brokering activities continued to lose ground to electronic rivals.
Nevertheless, the payout was covered a reasonable 1.5 times by profits and has been lifted a respectable 41% since 2008 and the onset of the banking crash…
…which is a creditable performance given ICAP’s activities within the wholesale financial markets!
Attractive dividend incomes for you to research today
So there you go – four sizeable names with appealing high yields and track records of lifting their dividends during the financial crisis and recession.
Whether these shares will outperform Royal Mail from here, though, is difficult to say right now.
But what does seem clear is that there are still attractive dividend incomes around for you to research today…
…and opportunities where you do not have to contend with arbitrary government allocations to get hold of a worthwhile stake!
> Maynard does not own any share mentioned