The UK post office, the Royal Mail, is going public. The UK has a long history of this sort of privatization but most of the big ones came in the 1980’s and early 90’s. The threats to any post office are obvious and there are a lot of them; paying bills online, email, magazine-like content on the web and even online banking. There are also probably fewer catalogs that get mailed out but that might be offset by the delivery of of the stuff we buy online.
Generically speaking there is a lot of room for gains in efficiency stemming from technological advancement and in the case of Royal Mail, getting the government to absorb the pension obligations.
Taking the Royal Mail public has been controversial for several reasons including concerns of the workers over their future. The deal has been structured to try to appease employees by giving all of them a few shares and committing to pay a large dividend.
We’ll see how large the dividend is but there are three other European post offices that are publicly traded; Deutsche Post which yields 2.8%, Oesterreischeische Post which yields 5.3% and earlier this year Bpost went public priced to yield 5% but it hasn’t paid a dividend yet. Oesterreischeische is Austria and Bpost is Belgium. The first two have performed well but it is a little early to draw any conclusions on Bpost.
Over the years I have written quite a few posts about market segments that are somewhat off the beaten path. There are two reasons for this. One is that it is a lot of fun to learn about new (to me) things in the market regardless of whether they ever make their way into the portfolio.
The other reason is that one of these things might make their way into the portfolio and help clients. In the past we’ve looked at things including airports and toll roads and while the ability to trade them on a large scale (as an RIA might do) is not great some have done very well and had high payouts along the way. I continue to believe there is a holy grail holding of sorts with low volatility, high yield and performs better than the utilities sector. Maybe we’ve found it already in one of these or we can continue to look.