Why I’m Buying Into The Special Dividend At ITV plc and Avoiding The Dividend Cut at Barclays plc

This Fool explains why he’s buying Into the special dividend at ITV plc (LON: ITV) while steering clear of the dividend cut at Barclays plc (LON: BARC).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As results season starts to slow, I find that I now have more time to be able to circle back to have a proper read through the results and watch the presentations of companies whose shares I don’t own, but that interest me enough to do a bit more digging.

There’s a huge volume of facts and figures, not to mention the seemingly-never-ending institutional comment to digest. So it can take investors a while to come around to the appeal of certain companies, meaning that sometimes there are opportunities to be had for those prepared to look past the next quarter’s trading update.

A game of two halves

On that thought, I’ve been looking a little closer at two companies that have caught my eye over the reporting period. Barclays (LSE: BARC) is one of the ‘bad banks’, which seems to be unable to go a day without being in the news, and broadcaster ITV (LSE: ITV). Both reported last week and both share prices fell following the announcements.

Should you invest £1,000 in Anglo American right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Anglo American made the list?

See the 6 stocks

Before we dig deeper, a quick look at the three-year chart below shows that there’s been a clear divergence in the share price over the last three years. Obviously, there’s usually a good reason for both positive and negative reactions to company results. The longer term one looks, the more accurate these reactions seem to be as the market eventually becomes the weighing machine it’s supposed to be.

For me, one standout reason for the differing share price can be seen by looking at the earnings performance over the last three years (2013-15 inclusive).

It’s clear ITV is the star performer here as it has managed to grow normalised earnings per share (NEPS) by 60%, from 9.21p in 2013 to 14.7p in 2015.

On the flip side, Barclays has seen the same normalised NEPS figure reduce by 72%, from 5.92p in 2013 to 1.65p in 2015, according to data from Stockopedia.

Notwithstanding the negativity in the market in general, and some concerns about debt, it’s fairly easy to see why one share has outperformed the other.

Dividend appeal versus dividend dog

Another measure of outperformance can be seen in growth of the dividend. Again, here we can see that ITV has outperformed, looking at the same three-year period. Inclusive of the three special dividends, which accompanied the normal dividend at year-end, shareholders at ITV have seen the total payout rise by 113%, from 7.5p in 2013 to 16p currently. Even if investors wanted to strip out the special dividend, the normal dividend has risen from 3.5p to 6p over the same period or by 71% – none too shabby.

On the other hand, Barclays shareholders have seen a flat dividend of 6.5p over the last three years, this will now be cut to 3p for 2016 and 2017 as the bank restructures. On the other hand ITV has pledged to grow the ordinary dividend by at least 20% to 2016.

Will You Grow Richer In 2016?

So for me the choice is a simple one – I like to see growing dividends as I find it a key measure of confidence going forward, and while there may be value in Barclays shares down here – they’re not for me currently.

Should you buy Anglo American now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Dave Sullivan has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

These 4 FTSE shares have crashed hard. Which do I like today?

These four FTSE 100 stocks have plunged in value over the last month. But after this latest market meltdown, which…

Read more »

Investing Articles

1 FTSE 250 stock that analysts are calling a ‘Strong Buy’

The FTSE 250 can be overlooked by investors, but analysts believe this stock in particular could be undervalued by as…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

I asked ChatGPT to name 5 FTSE shares for the perfect SIPP. Here’s what it picked

Harvey Jones called on ChatGPT to help him decide which shares would be right to buy for a well-balanced SIPP.…

Read more »

Investing Articles

Should I load up on Rolls-Royce shares after the 17% drop?

Rolls-Royce shares have pulled back sharply in the FTSE 100 in recent weeks, leaving this Fool to wonder if he…

Read more »

Investing Articles

Is this the best S&P 500 stock to consider buying in these volatile times?

With bullion prices still rocketing, I think buying the S&P 500's only gold stock is worth serious consideration right now.

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Yielding 7.25% but with a P/E of 186x! What’s up with the BP share price?

Harvey Jones thought the BP share price was a brilliant bargain but it's only brought him a world of trouble.…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Down 26% with a 7% yield! Could this little-known FTSE 250 gem make a comeback?

Mark Hartley considers the long-term prospects of FTSE 250 recruiter Page Group. Weak results have sent the price tumbling but…

Read more »

Investing Articles

Analysts are calling Diageo shares a strong buy! Are they mad?

Analysts still have faith in Diageo shares, with 10 of them giving it the highest possible stock rating. Harvey Jones…

Read more »