Does Capita PLC’s 5.6% Dividend Yield Make It A Superior Income Stock Than Vodafone Group plc, National Grid plc, GlaxoSmithKline plc And easyJet plc After Results Release?

Is Capita PLC (LON:CPI) (LSE:CPI.L) a better income stock than Vodafone Group plc (LON:VOD) (LSE:VOD.L), National Grid plc (LON:NG) (LSE:NG.L), GlaxoSmithKline plc (LON:GSK) (LSE:GSK.L) and easyJet plc (LON:EZJ) (LSE:EZJ.L)?

Capita PLC
Capita PLC

Capita PLC (LON:CPI) (LSE:CPI.L) has released results for 2016 to investors today. Its total dividend per share has been maintained at 31.7p. This means it has a dividend yield of 5.6%, which I believe puts it among the highest-yielding income stocks in the UK.

However, it’s all change at Capita. The company has announced its CEO Andy Parker will stand down following 3 years at the helm. I think this could cause some uncertainty in the short run, but in the long term a new strategy and new ideas could be beneficial as Capita seeks to deliver improved returns for income investors.

Its 2016 results showed some challenges for the business. That’s a main reason why dividends per share have been maintained rather than increased. Capita’s revenue increased 1% to £4909 million on a reported basis, but profit before tax dropped 33% to £74.8 million on a reported basis.

In response, Capita has invested in reducing its cost base, increasing management accountability and simplifying the business. It has also sought to strengthen its balance sheet in order to return to profitable growth, which could boost its dividends over the medium term. Further, it is making asset disposals of its Asset Services and Specialist Recruitment businesses and it expects 2017 to be a transitional year before the company seeks to return to growth in 2018.

Its dividend yield of 5.6% has appeal for income investors in my opinion. It is generally in line with other popular income shares such as Vodafone Group plc (LON:VOD) (LSE:VOD.L), National Grid plc (LON:NG) (LSE:NG.L), GlaxoSmithKline plc (LON:GSK) (LSE:GSK.L) and easyJet plc (LON:EZJ) (LSE:EZJ.L). Vodafone’s shares yield 5.65%, National Grid has a yield of 4.45%, easyJet’s yield is 5.62% and shares in GlaxoSmithKline yield 4.8%.

In my opinion, Capita’s dividend yield is bound to appeal to some income investors. However, I think the business faces risks and could experience more difficulties. A new CEO may change the company’s strategy and this may cause investor sentiment to decline in the short run in my opinion. Therefore, while I can understand the income appeal of Capita’s shares, I’d rather buy other income stocks such as National Grid, Vodafone, GlaxoSmithKline or easyJet at the moment.







By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close