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Royal Mail Due to Return to FTSE 100

Wed, 14th Mar 2018

Six months after demotion, Royal Mail is due to make a return to the FTSE 100, with the shopping centre owner Hammerson tipped to be one of the companies dropping out of the index during the forthcoming reshuffle.

The rebalance of the FTSE indices takes place once every three months and is based on market capitalisation at the end of each quarter. Royal Mail was demoted six months ago thanks to share price struggles which saw its shares fall to 390.5p, but it has since recovered to 560p and is expected to rejoin the leading index. Hammerson, in contrast, is likely to end up in the FTSE 250 after being hit by falls in consumer spending and the growth of online shopping.

Royal mail floated in 2013 at 330p, and grew up beyond 600p quickly - raising questions over whether the shares had been offered up too cheaply when the company was added to the markets. The dividends were 20p per share initially, and have increased to 23p per share so far, with the expectation that they will increase to 24p at the end of the financial year. Dividend yields have been a source of strong support for the stock, and the fact that the company appears to have pension liabilities under control has also been good for investor sentiment in recent months, helping the company to remain a popular option for investors even when it was put out of the top flight for a while.

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