Buying a company that has roots back to 1516 AD

Royal Mail plc (RMG.L)

Who are they:

Royal Mail  is a postal service and courier company in the United Kingdom, originally established in 1516. The company's subsidiary, Royal Mail Group Limited, operates the brands Royal Mail (letters) and Parcelforce Worldwide (parcels). General Logistics Systems, an international logistics company, is a wholly owned subsidiary of Royal Mail Group.

The company provides mail collection and delivery services throughout the UK. Letters are deposited in a pillar or wall box, taken to a post office, or collected in bulk from businesses. Deliveries are made at least once every day except Sundays and bank holidays at uniform charges for all UK destinations. Royal Mail generally aims to make first class deliveries the next business day throughout the nation.

For most of its history, Royal Mail has been a public service, operating as a government department or public corporation. However, following the Postal Services Act 2011, a majority of the shares in Royal Mail were floated on the London Stock Exchange in 2013. The UK government initially retained a 30% stake in Royal Mail, but sold its remaining shares in 2015, ending 499 years of public ownership. It is a constituent of the FTSE 100 Index.

How did i find them?

I was chatting to my postman the other day and he was mentioning that he was buying some more shares as the price is so low. I asked why they were so low and he explained about the company floating 5 years ago and all employees got free shares . But they could not cash in the shares until they have held them for a least 5 years to avoid tax. "Some 145,000 postal workers have waited five years to sell the free shares they were given at the time of privatisation without being taxed" - BBC.  Now the five years is up employees were selling when the price was at the top and now its dropping they are panicking as they think they are losing money so they are also cashing in. 

I asked how he felt about the company. He explained that everything seems really good, plenty of work, good working conditions and they are getting a new vehicle roll out. Thats another reason why he was adding to the low price shares. The company peaked in May this year at 632p and has nearly halved at 336p.

Company downside:

One of the main factors that puts it at a disadvantage to other couriers is that it there is alot of manhandling and alot of people on the payroll. They also have a duty to visit every house in the UK at no additional costs  on a letter price if its a letter. All this makes Royal mail one of the most , if not the most expensive ways of sending a parcel.

Royal mails core revenue used to be the delivery of letters but this is and has been diminishing over the years. 

With these high running costs the lastest earnings have tumbled. Pre-tax profit more than halved to £33m for the six months to 23 September despite a 1% rise in revenues to just over £4.9bn.

Revenue from its GLS European parcel operations was up 9%, offsetting a 1% fall in the UK parcels and letters. While this does not initially look good most of the downside was due to the fall in letter deliveries. Other sub core areas have been expanding.Growth in online shopping helped drive a 6% rise in revenues for the UK parcels business, but total revenue from letters was down 7%. Adjusted pre-tax profit was down 27% to £183m.

The Numbers:

Market Cap : £3B     

Current Market Value: £3.27  Future cash flow value: £4.49

P/E :34.6                                Expected annual growth in earnings : 15.2%

Debt : 16.7% (and is well covered by operating cash flow)

Dividend :7.33%

Whilst this is a very old company the dividend have only been paid out for the last 4 years and the dividends have been increasing. This short period is because that the company only fully floated 5 years ago.

Reasons for buying:

This is a very well established company with an amazing brand  and an ever increasing market. While letters used to be their core component the future is in parcels and counter services (money transfers, important document transfers eg driving license, passports. ) plus its expansion of  General Logistics Systems (GLS) across Germany and Europe . Not only does this company have the edge in providing a 100% UK coverage but it also provides a face to face counter service, last minute delivery and an expanding services growth sector both in the UK and other countries. 

This is a one of a kind company in the UK that has held back its competitors. The dividend has been increasing YOY  .The expansion of Royal Mail’s GLS division looks set to continue over the medium term. It seems to be gaining traction in existing markets and could help to offset the decline in Letters volumes in the UK.

Conclusion:

For me this has long term growth potential with a steady dividend income stream that is at a 5 year low in over sold conditions.

Facebook : https://www.facebook.com/The-Simple-Minded-Investor-588601821570572/?modal=admin_todo_tour

Upping my game

Upping my game

Ive been looking at some of my past posts and i think i really need to do more to express whats stocks Im purchasing or what other passive income models i'm thinking of employing or currently doing. Im also now thinking of starting a Facebook and twitter feed to help link this blog; though that will mean i will have to change this blog from private to public.

Things i could do with doing :

•  Open a Facebook and twitter feed.
• Talk about what stocks I have and why.
• Talk about what other passive income im using.
• What and how am i contributing to my account every month.
• About history on how i got into this and about my history as a day trading.

Heres the new Facebook link:

https://www.facebook.com/The-Simple-Minded-Investor-588601821570572/?modal=admin_todo_tour

Well there's the link and now i'll have to put some content to it.

And here's my twitter feed: 

https://twitter.com/Mindedinvestor

Well that's two off the list ticked off :) (just have to add content). 

My daughter is asking questions:

Earlier in the month my 11 year who often asks questions about my charts etc, finally wanted me to drill down to her exactly what I am doing. Now she wants in on the game.

I decided to give her £10 a month to invest and have opened her a trading account with trading212.com. This site offers the same benefits as robinhood except its for the UK but does not drip the dividends. She understands about dividends and overbought ,  oversold, 52 week lows and highs, insider trading. She also checks debt ratios and price earnings. Using thesimplywallstreet site shes also setup her own watch list. 

I actually bought a company she found and recommended.  It's is on the LSE: RMG Royal mail group.

I'll write a post about the purchase and reasons tomorrow, but it's getting late here now ( 23.58) and my eyes are closing.

Good night.

October 2018 just lovin it !

October 2018

Lets get straight to the figures:
Passive income total for the month was an amazing £775.21.
As written previously the monthly target is £382.
The overall income so far this year is £5226.28 and the target for the whole year has been smashed as it is £4587. That means the next two months are a complete bonus and gets me closer earlier to retirement for 50.

Ok lets look at the dividends:
Total for the month including the bonds was £224.70. This is just amazing and a all new record.

These are the stocks that i currently own:

Things ive adapted: 
I've started checking the stock prices on charts to see how maybe they could be over bought. From this i have sold two stocks and bought some more. Im slowly converting the portfolio to a more undervalued dividend growth.

Account Value:
The current portfolio value now stands at £17, 561.

How do i feel:
There has been a major stock market correction , but i added more stocks in at the low. I dont think its time for the crash and am looking for around end of 2019 or 2020 for the crash. Everything is going very well and better than i would have guessed at the start of the year. Im hitting new records every month. Its all very exciting.

September 2018

September soon comes around. Its probably because the summer holidays were very enjoyable.

I met a guy this week who i have known for around 25 years and he has only 1 week left to live . He has cancer. But the main part of this story is his age and hows long he has enjoyed retirement and money to enjoy life. He is 66 and officially retired 1 year ago. Thats paying all those taxes and only claiming for one year. This gives me a bit more of an incentive to retire with passive income or if i can reach £2,500 per month earlier then i shall retire earlier.

The guy who rents the unit has paid up which was very good and so that put £200 into the account.
This months total passive income was : £676. 79 . This still holds me way above this years monthly target that is £382 per month.
Total this year so far : £ 4451.07 and my target for the whole year is £4587. So next month October i should smash my target.

Dividends
New month record at £56.10 .  I know its not much but its growing quite fast.
These are my current holdings and % of the portfolio:



 Account value :£12,260 and i'm holding of that £1,141 in cash.

Crest Nicholson HoldingsIm not too impressed to far with the share price as all its doing is tanking now at nearly -40% , ive not heard any bad news yet to worry about anything so ill hang in there and just keep collecting the divs. ContributionsIm still managing to contribute £500 per month every month and all the dividends are reinvested. Everything that is left over is held in a bank account as cash which is held at a steady £10,000.
Gold , Silver , Natgas trading  Ive sold the natgas at a £50 profit and still holding the silver and gold trades. They don't cost anything to hold and the trade is still valid and all my reasons for buying. Im not adding anymore to them now.
Conclusion:Everything seems to be going well and the passive income exceeding expectations, I'm quite happy and still on target to retire for when i'm 50.