This week we are going to select one of the UK's foremost retail groups that seems to have slipped under the radar in recent times. In the DividendMax optimizer it sits in 10th place in the FTSE 100 as the proximity to the final dividend, estimated to be 11p draws near.
The company's website states that the stock will go ex-dividend on 29th May, so not long to wait. They announce their final results on the 21st May, a week from today. We maintain our current safety-first stance and stick to the FTSE 100, although we are well aware that the index is overbought in many sectors.
The top nine in the Optimizer are Vodafone, Resolution, Admiral, National Grid, SSE, Royal Dutch Shell, Sainsbury, Morrisons and United Utilities. This week's choice; Marks & Spencer lies in tenth spot yielding 6.41% over three dividends if analysts forecasts of roughly 11p, 6.4p and 11.4p over the next 53/54 weeks prove correct.
We have not seen especially great results from the retailers and I do not expect M&S to sparkle either, but as other sectors have started to look expensive, looking beyond next weeks numbers, a forward P/E of 12.2 does not look too demanding and the yield is solid. They are well up on their 52 week low and it is becoming increasingly difficult to find exceptional value (so easy a year ago) with the market having risen so far so fast, but with returns elsewhere being pretty dismal, over 6% still looks good by any standards.
As a retail business, it sits uncomfortably between specialists such as Tesco on the one hand and Next on the other. I believe it has the brand power to compete with both.
Comparables with Next are interesting (bear in mind the recovery story at Next)
| M&S | Next | |
| Market Cap | £6838m | £7369m |
| Revenues | £10B | £3.562B |
| PTP | £655m | £666m |
For the quality of its brand, the excellent food business and the potential for recovery in the clothing business, Marks & Spencer is our dividend of the week.
