As dividend-paying stocks go, Mark’s & Spencer is not exactly a “hidden champion”. On the contrary, it’s a company that just about everyone in the UK (investor or not) is aware of.
Because of its long history as the centrepiece of many UK high streets the company is often seen as a safe and dependable investment,and today the company’s shares can be purchased for about 330p and with a dividend yield of around 5.5%.
Safe, dependable and with a yield of 5.5%; what’s not to like?
But the reality of the last decade or two show that M&S is not quite as safe and dependable as its enduring presence suggests.
In fact, after recently reviewing M&S I found a company that:
- Is strongly cyclical (which is normal for clothing retailers)
- Has grown very slowly (and failed to keep up with inflation)
- Tends to increase its dividend unsustainably during economic booms (only to cut it back during the next inevitable bust)
- Is carrying large debt and pension liabilities (which is usually not a good idea for cyclical companies)
But it isn’t all bad news. If the company continues to focus on its more successful food business rather than its ailing clothing business, then things may just work out better in the future than they have in the recent past.
To read my full review of M&S just click on one of the links below:
Is M&S’s near-6% dividend yield big enough?