A new stock has entered our dividend watch screen, offering a forecast dividend yield of 6.5 per cent.
Manx Telecom, as its name suggests the firm provides fixed-line, broadband and mobile communications services on the Isle of Man. It is a leading player, but has recently been dealt a blow after failing to land a contract to supply the Isle of Man government with mobile telephony services.
Simon McGarry, of Cannacord Genuity Wealth Management, explains: ‘The Isle of Man government has a vested interest in Manx’s success (80 per cent share of the Isle of Man broadband market) in order to help them deliver the social benefits of better broadband connectivity.
‘However, in late 2017, the Isle of Man government opted for their main competitor Sure instead of Manx to supply the government with mobile telephony services. As a result, Manx lost roughly a fifth of its post-pay revenues. Pricing also remains more challenging with Manx having limited ability to continue to raise fixed line prices.’
The share price, though, has been steady, holding up at around 190 pence per share year-to-date. In addition, the business is viewed as highly cash generative by analysts. It also boosted its dividend last month, despite revenue falling 2.9 per cent year-on-year.
The four other names our dividend danger zone screen has concerns about are: Imperial Brands, Card Factory, National Grid and Essentra.
The mechanics behind the share screen
The dividend danger zone screen screens UK shares on the following basis: a market cap of over £200 million, a dividend yield of 4 per cent (higher than the FTSE 100 average) and a dividend cover score of below 1.4 times. Two other filters have also been applied: the first filters out companies that appear in a financially sound position to pay off their debts, while the second excludes firms where earnings have been upgraded by analysts.
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