In this week’s Commercial Awareness update, we discuss a global dividend record, RBS’s return to profit, Walmart’s underwhelming Christmas, an energy price cap and how Kylie Jenner wiped $1.3 billion off Snapchat’s share price.
Global dividends set record in 2017
Dividend payments - a sum of money paid by a company to its shareholders out of its profits - reached new heights in 2017 on the back of strong growth in the global economy and more confidence, especially in the American markets. Dividends grew a staggering 7.7% globally to $1.3 trillion, with US companies being a significant driver of this growth. After years of being subdued after the financial crisis, confidence is back in the banking sector with dividend payments tripling since 2011. However, the European growth in dividend payments wasn’t as strong, lacking behind at 2.7% growth compared to the previous year. The weak pound held Britain back, as British companies struggled to maintain their profit margins.
The global energy and oil company Royal Dutch Shell held its position as the biggest dividend payer. Apple and Microsoft are also in the top 20, which made up 15.7% of the dividend payment total.
Questions to ask yourself… What could affect dividend payments in 2018? Do the biggest companies in the world have too much influence?
Companies to Watch
After ten years, taxpayer owned RBS has recorded an annual profit of £752 million in 2017, which is a significant improvement on the £7 billion they lost back in 2016. The bank is still 71% owned by the taxpayer, but the government could look to sell their shares off if they continue to prosper. In October 2008, the Treasury provided a bailout package of £45 billion to the bank. However, it wasn’t all good news for RBS as they have a looming fine from the Department of Justice in America over the sale of products linked to risky mortgages before the financial crisis of 2007/8. This was playing on investors’ minds with the share price last week dropping 5%. The share price currently stands at 269p - if the government sells their shares at this price, they stand to make a significant loss on the deal.
American retail giant Walmart experienced its worst share price collapse in three decades last week, after they announced their most recent quarter figures on Tuesday. Walmart’s share price dropped 13% as investors reacted to the news that online sales growth was below market expectations. Last quarter sales rose 23% compared to the previous year, compared to the 50% increase in the third quarter. They have attributed this to the acquisition of Jet.com in the same period the previous year, which would have spiked sales. Therefore, making it likely there will be a less significant increase in the last quarter. However, many commentators suggest this is a sign that Walmart is falling further behind online retailer and market leader Amazon.
Questions to ask yourself… Should the Department of Justice still be pursuing banks over potential wrongdoing over a decade ago? What can Walmart do to compete with Amazon?
Energy prices to be capped
After years of debate on the topic of energy bills and whether there should be caps on tariffs, new legislation introduced to Parliament today plans to crack down on overpriced energy tariffs. The law will allow the industry regulators Ofgem to step in if a company is charging too much for their standard variable tariffs. This is in response to a lack of competition in the market which often means households have limited choice and pay over-inflated rates for their energy. The government claim this new bill will benefit 11 million people in the UK until 2021, if the legislation comes into place early next year. This could lead to an average household saving of £100.
The idea of a universal tariff cap was originally proposed by ex-Labour leader in 2013, but has been taken on by Theresa May’s Conservatives. It will be debated today in Parliament, but expect it to be passed through the house in some form.
Question to ask yourself… Should the government have this much influence on what private companies can charge?
How did Kylie Jenner wipe $1.3 billion off Snapchats share price
Last week, a tweet sent by reality television star Kylie Jenner caused shares in Snap Inc. to plummet 6%, wiping off $1.3 billion from its share price. Investors have been apprehensive about Snapchat’s ability to stay relevant and continue their huge growth, and were spooked when Jenner tweeted “sooo does anyone else not open Snapchat anymore? Or is it just me…”.
Celebrity culture in the 21st century has reached new heights with social media and 24 hour news, giving these people significant influence. This also highlights how weak Snapchat’s proposition could be, if it needs celebrities use to maintain its popularity. Snapchat’s share price has been rising recently, encouraged by stronger-than-expected user growth figures in the last quarter of 2017. However, since its IPO at the beginning of 2017 the company’s share price has struggled to rise above the $17 initial share price.
Question to ask yourself… How can Snapchat become less reliant on celebrity users?