Is Carillion plc A Superior Income Stock Compared To National Grid plc, Unilever plc, Imperial Brands PLC And Aviva plc After FY Trading Update?

Will Carillion plc (LON:CLLN) outperform National Grid plc (LON:NG), Unilever plc (LON:ULVR), Imperial Brands PLC (LON:IMB) and Aviva plc (LON:AV)?

Carillion plc
Carillion plc

Carillion plc (LON:CLLN) (LSE:CLLN.L) has released a full year trading update. It shows that the company continues to perform in line with expectations. It expects to record strong growth in total sales as well as an improvement in EBIT.

Performance has been led by sales growth and an improvement in margins within support services. New orders plus probable orders are due to reach £4.5 billion in 2016, with total orders plus probable orders for 2016 expected to be £16 billion. Although this is down on the £17.4 billion achieved in 2015, it nevertheless shows that Carillion is performing well on a relative basis.

Carillion anticipates that net borrowings will fall against the H1 level. Its revenue visibility of 70% may be lower than at the same time as last year, when it was 84%. However, it is still relatively high and means that Carillion’s short term future remains positive.

The fact that two thirds of its operating profit is derived from the support services segment bodes well in my view. It is experiencing improved margins, but Carillion has seen order intake fall in H2. This could be due to a reassessment of spending by government departments following the EU referendum. However, since the autumn statement focused on infrastructure spending in areas where Carillion has a strong foothold, its medium term outlook remains upbeat in my opinion.

Carillion currently yields 7.5%. This is higher than frequently purchased dividend shares such as National Grid plc (LON:NG), Unilever plc (LON:ULVR), Imperial Brands PLC (LON:IMB) and Aviva plc (LON:AV). National Grid yields 4.8%, Imperial Brands yields 4.9%, Aviva has a yield of 5.1% and Unilever’s figure is 3.4%.

In my view, Carillion is experiencing a difficult period, but is performing relatively well given the uncertain trading circumstances it is facing. Its yield is high and although it may not have the stability of other shares in terms of having a robust business model, I believe that it offers high income appeal in the long run.







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