A Great Dividend Share in the Making
LONDON -- Most investors love dividend shares. They pay a steady stream of income and tend to be low-maintenance compared to most other companies. What's more, you can get a much higher level of income than you can from an ordinary savings account.
Traditionally, you'll find such shares in the FTSE 100 (UKX), but it's worth looking further down the market as well. One possibility is Cineworld (ISE: CINE.L) , whose cinemas take around a quarter of all U.K. box-office receipts.
I like this business because it's simple to understand. Basically, you're running a load of sheds that are full of semicomfortable seats and fiercely air-conditioned. OK, you do need to invest in the latest technology -- 3D, digital, and the like -- but it should be relatively easy for any experienced management team to keep on top of this.
While Cineworld has to take the films that are offered, the big film studios do a lot of your marketing for you. And box-office receipts don't tend to be that volatile from year to year, allowing you to turn a fair chunk of the money you get into those lovely dividends. It's also easy to keep track of how U.K. receipts are progressing throughout the year via sites like imdb.com and boxofficemojo.com.
The digital revolution doesn't seem to have affected the world of cinema just yet. Although we're viewing more films through the services of BSkyB and BT, we're still enjoying the cheap evenings out that the movies offer. And many cinemas are also branching out with screenings of special events, junior film clubs, and so on, filling out the quieter periods of the year.
In many ways, this business reminds me of the undertaker Dignity (ISE: DTY.L) . Demand for its services is pretty steady from year to year, and it doesn't need to do much to attract custom other than be in the right place. Like Dignity, it's also the only business of its type on the U.K. market, which can sometimes work to our advantage as investors, as such firms can slip under the radar.
Cineworld isn't resting on its laurels, though. It has introduced some new features into my local cinema recently. No longer do you have to queue for ages, as you can buy tickets at the counters that serve ice cream, popcorn, and those smelly nachos. Even better, there is now a 10% discount for booking online, whereas before you had to pay a booking fee.
Offering this discount looks like it has produced a small hit in revenue, as seen from its latest trading update. But I agree with the company when it says that it should help develop customer relationships over the long term.
I'm sure they're already building up a database of what films we're showing up for so they can tweak future marketing campaigns. It's their very own version of Tesco's Clubcard. I can save them a little time here, as I'm pretty keen on The Dark Knight Rises and The Hobbit -- though I'm already thinking of excuses to get me out of seeing the latest Twilight installment.
Anyway, what of the dividend? Last year 11 pence per share was paid, and 12 pence is forecast for this one. On the current share price of 208 pence, that's a historic yield of 5.3% and a prospective yield of 5.8%. If the dividend does indeed rise to 12 pence, that will represent a 5% annual increase since the company floated back in 2007.
If you're really interested in dividend shares, then make sure you get your copy of our report on "8 Shares Held By Britain's Super Investor" -- it's free and yours to keep!
Are you looking to profit from this uncertain economy? "Ten Steps To Making A Million In The Market" is The Motley Fool's latest report. We urge you to read it today -- your wealth could be transformed. Click here now to request your free, no-obligation copy.
Further Motley Fool investment opportunities:
At the time this article was published The Motley Fool owns shares of Tesco.Motley Fool newsletter serviceshave recommended buying shares of Tesco. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.