McColl’s Retail and Stobart

“The FTSE 100 had one of its best starts to a new trading week in a long time thanks to the new found peace between the US and China. The index was up 2.1% to 7,129 in early trading on Monday. “Mining stocks surged ahead, including Antofagasta, Evraz and Anglo American all achieving share price gains of between 6% and 7%, on hopes that there will no longer be a fierce trade war which could hurt China’s economy. Donald Trump and Xi Jinping agreed to a temporary truce over the weekend at the G20 meeting. “Markets were also strong in Europe with 2% gains across the main indices, plus a 2.6% advance from China’s SSE index,” says Russ Mould, Investment Director at AJ Bell.

McColl’s Retail

“The convenience store operator has issued another profit warning, blaming supply chain issues and difficult trading conditions. This echoes a previous warning in July. “It looks to be in the middle of a tough period, although it will hope this is only a temporary setback.

“The long-term goal is to have Morrisons supply both Safeway and branded products to McColl’s, potentially putting it in a stronger position to fight competition in the convenience store space. The near-term challenge is to improve availability of products and get them priced in the best fashion.

“While it irons out these issues, we’re told earnings will be lower than previously expected. That begs the question whether the dividend will also be cut at the end of the financial year.

“The grocery industry is incredibly competitive and operators have to do everything they can in order to drive sales and keep costs under control. Any slip-up can have disastrous consequences and put a business back both financially and strategically, and that’s exactly where McColl’s sits today.”

Stobart

“Investors like dividends because a big component of the potential gains from investing in the stock market is associated with these regular shareholder payments

“However, that doesn’t mean a dividend should be preserved at all costs and the decision by infrastructure services firm Stobart to trim its full year dividend could turn out to be the right one for the business and therefore ultimately for shareholders.

“The owner of Southend Airport has been in the headlines for different reasons of late as it has navigated a high-profile court and boardroom battle with its former chief executive Andrew Tinkler – the judge in this complicated case is set to deliver their judgement in early 2019.

“Putting this issue to one side, Stobart’s decision on the dividend was predictable given a payout at the same level as last year would have implied a yield upwards of 8%, typically a sign the market believes a cut is coming.

“It is also sensible as the generous income stream from Stobart has been sustained by the disposal of non-core assets in recent years. These proceeds will now be used to invest in the business and to ensure the company has a strong balance sheet.

“Assuming the money is spent wisely, which is never a given, then genuinely ‘long-term’ shareholders should probably welcome this plan.”

These articles are for information purposes only and are not a personal recommendation or advice.