If you had invested £1,000 into Royal Mail’s IPO, this is what you’d have today

Royal Mail (LSE: RMG) was listed on the London Stock
Exchange in 2013. At the time, an inquiry was tabled in parliament to determine
whether the company’s shares were overly discounted during the issue.

In its IPO, Royal Mail issued each share at 330p but closed
off at 450p after a day’s trade. Later on, the firm’s shares jumped to more than
600p.

 Now, before you get excited, you’ll be worried
to note that as at today, Royal Mail’s shares are trading at 250p. Quick math reveals
a drop of about 24% from its IPO price and 44% down compared to its first day
of trading.

In other
words, if you held shares worth £1,000 at the time the company was going
public, they’d be worth about £750 today.

But all is
not lost for those in possession of Royal Mail’s shares. The company is one of
the most generous when it comes to dividend payouts, perhaps compensating its
dwindling share price.

Therefore,
the only way to look at shares in the entity is as an income investment.

As of this day, the company has paid out dividends totalling to 135.9p
per share. If that payout is added to a share price of 240p, the resulting
figure is 376p. Meaning, an investor who put his money in the company when it listed
six years ago has received a return of 14% during the entire period.

Well, that doesn’t look so good, but at least not disastrous. But for
shareholders who paid for the shares after they had soared to more than 400p,
they’ve definitely lost money.

Last year, Royal Mail paid a dividend of 25p for each share held,
but this year, the ratio is expected to come down to 15.9p per
share.

According to experts, the company has minimal automation
mechanisms within its operations. Compared to rival companies, Royal Mail is
losing a lot of money on processes that ought to be automated.

Sources indicate that the company is putting in place measures to
restructure into an efficient entity. Still, organizational politics due to its
large workforce has been derailing the plan since a strike threat is never out
of the question.

While unions have a right to object to changes that could result
in job losses, the truth is that mail communication is dwindling by the day. So
if Royal Mail is to survive the next few years, restructuring is inevitable.