Midas : M&S could pay dividends 4.75p (ye23) 5.2 (ye24)15 Jan 2023 01:25
dividends
Remember when Marks & Spencer could do no wrong? When profits seemed to rise almost effortlessly from year to year and the business was a byword for success.
Those days seem a long way away. The shares have gyrated for the past three decades and, at £1.46, they are now worth less than they were in the early 1990s.
The company has been trying to regain its halo for years, egged on by millions of shoppers, particularly those of a certain age, who remember M&S in its glory days. But there have been successive mishaps – underinvestment in online shopping, tired-looking stores and dowdy clothes that failed to chime with the modern consumer.
The group has hired many a retail guru to try to move the business into the modern era. Last week chief executive Stuart Machin boldly suggested these efforts are bearing fruit.
Like-for-like sales rose 7.2 per cent in the three months to December 31, with revenues from clothing and home up almost 9 per cent and market share growing to more than 10 per cent – a sevenyear high.
The much-loved food division delivered growth of 6.3 per cent, but also gained market share, with shoppers particularly excited by both Remarksable bargains and the Collection luxury range. Machin, a career retailer who became chief executive last May, is clearly pleased with the figures.
Recognising that economic headwinds and cost pressures cannot be ignored, he seems confident that M&S can make progress by upping its game on the clothing front, upgrading stores, improving its online effort and cutting costs.
For long-suffering shareholders, recovery cannot come fast enough. Not only has the stock underperformed for years but the group paid its last dividend in January 2020.
There are hints that this could change when M&S reports annual figures in May.
The company has cut debt substantially, while sales and profits are well ahead of earlier lows.
City analysts now hope for a dividend of around 4.75p this year, rising to 5.2p in 2024.
Midas verdict: Marks & Spencer shares have consistently disappointed but there has been a shift in sentiment over recent months, with the stock rising from 93p to £1.46 since October. If Machin continues to deliver progress, the price should make further gains from here, while the prospect of dividend payments could further boost the stock. Existing shareholders should stick with the business. Brave investors may even choose to dip their toes in the water at current levels.
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