Is a Royal Mail special dividend on the way?

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Recently privatised Royal Mail (RMG) on Friday said it delivered up to ten million parcels a day over the festive season as gift buyers switched to online retailing.

Overall sales rose 2% in the nine months to 29 December, with an 8% rise in parcel revenues more than offsetting a 3% decline in letters. However parcel volumes remained flat, with revenue pushed up by steep price hikes.

The government has been widely criticised by opposition parties and unions who say its £3.3 billion price tag last October was set too cheaply. That has been exacerbated by news that its valuation omitted the three substantial development sites it owns in London, which were valued at between £1 billion and £1.5 billion but may be worth as much as £4 billion.

In the summer, Royal Mail submitted a planning application to Islington and Camden councils for 700 mostly private new flats at Mount Pleasant, a site that straddles both boroughs. Last week, the Mayor, under pressure from Royal Mail to speed matters up, granted the application himself. Royal Mail may decide to redress this with a special dividend.

Investor view

Not is everyone quite so pleased with today’s trading statement. 'Mary Mullins' on the Interactive Investor discussion boards said: "As a long-term holder I am disappointed at the update. Delivery technology is the area RM must concentrate on to drive volumes of parcels up.

"There are so many smart operators out there and RM is a long way off the curve. It will be interesting to see how the market reacts. Great potential in the company but the coming months must show more insight as to how market share is to be increased."

Shares in the firm rose 0.34% to 590.75p in the first hour of trading.

The company is due to deliver its annual results on 22 May. As yet there is no news about when will the remaining stake will be released to the market.