Royal Mail Plc Rises More Than 50% Over Offer Price

Shares in Royal Mail (LSE: RMG) hit the £5 mark for the first time today — and showed little sign of slowing down.

With the shares priced at 510p at the time of writing, this landmark means that the price has risen by more than 54% from the original 330p issue price .

This prompted criticism again the government in some quarters for undervaluing the shares, again — saying that its the taxpayer who has missed out on more than a billion pounds.

Business Secretary Vince Cable has defended the pricing by stating that he took advice from top investors in the City, who warned that the risk of strike action could depress the share price significantly.

However, as we saw on 16 October when the news was announced that postal workers voted to go on a national strike on 4 November, shares in Royal Mail only fell by around 3% to around 472p — they’ve since recovered, and then some.

It has since transpired that two banks warned the government that Royal Mail ought to be valued nearer 500p than 330p, according to the Financial Times, although these projections were made in June, long before the threat of strike action was proposed.

The escalated share price means that Royal Mail now yields closer to 4% than 6% as was originally intended — but that still beats the FTSE’s average of 3.5%.

So, Royal Mail has turned out to be a decent income-and-growth share. If you’re a holder, let us know what you think in the box below.

In the meantime, if you're looking to complement your Royal Mail holding with a solid 5% yield in a company that could still prosper if the economy turns for the worse, as well as deliver a healthy gain if sentiment suddenly improves, then you need to read our brand-new special report.

"The Motley Fool's Top Income Stock" is completely free, and will be sent to your inbox immediately! Just click here now to find out more...

> Sam owns shares in Royal Mail.