Deutsche Bank has trimmed its valuation on Royal Mail Group (LON:RMG), warning that the company’s dividend is ‘unsustainable’. The comments mark another blow for the privatised postal operator which lowered the upper end of its profit guidance earlier this month and warned that letter volumes would decline more than previously expected.
Royal Mail’s share price has advanced in London in today’s session, having gained 0.62 percent to 277.80p as of 14:44 GMT, outperforming the FTSE 250 which currently stands 0.30 percent higher at 18,743.25 points. The group’s shares have lost more than 47 percent of their value over the past year, as compared with about a three-percent drop in the Footsie.
Deutsche Bank trims price target
Deutsche Bank, which rates Royal Mail as a ‘sell,’ lowered its price target on the stock from 250p to 180p today. Proactive Investors quoted the analysts as warning again that the postal operator’s dividend was now facing the chop.
“We cut our 2019/20E dividend using what we think is a more sustainable dividend pay-out ratio of 70% of earnings,” the analysts pointed out.
The comments come after Liberum said last week that it expects the FTSE 100 group to announce a ‘significant’ dividend cut, also seeing the postal operator’s current payout as unsustainable, given that the current commitment represents a yield of nine percent.
Other analysts on Royal Mail
The 17 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 300.00p on the shares, with a high estimate of 410.00p and a low estimate of 220.00p. As of February 6, the consensus forecast amongst 18 polled investment analysts covering the blue-chip group has it that the company will underperform the market.