A glance at the six-year share-price chart for PayPoint (LSE: PAY) reveals that the stock has travelled broadly sideways over the period. But I think something has happened in the business recently that could reinvigorate growth going forward. Read on and I’ll explain.
The consumer payment and other services provider has been doing a good job of churning out chunky dividends to its shareholders. With the share price close to 1,046p, the combination of ordinary and special dividends yields just below a whopping 8%. And the forward-looking price-to-earnings multiple a little under 17 for the trading year to March 2020 suggests to me that the valuation remains anchored to the reality of the firm’s immediate prospects.
One big thing that could reignite growth
Meanwhile, PayPoint enjoys its super-stock label, according to one popular share research website, because of strong showings against valuation, quality and momentum indicators. Indeed, the operating margin is running close to 25% and the shares are up around 30% since the beginning of the year.
Today’s full-year figures are unremarkable. Revenue came in broadly flat and diluted earnings per share rose 3.3%. The directors pushed up the ordinary dividend by 1.9% and confirmed a repeat of last year’s special dividend, which is almost 80% of the value of the ordinary dividend and paid out on top.
However, one big thing that I believe could reignite growth in the business is that a new chief executive took over on 1 April. Patrick Headon succeeds Dominic Taylor who had been in control for more than 21 years and who led the company from start-up to where it is now. But I think a change at the top in a firm can bring in fresh eyes, renewed enthusiasm and a youthful determination to succeed, which could help power an upsurge in earnings growth.
Big plans for the future
A lot of today’s report is dedicated to the firm’s strategic plans. The company already has a vast network of users in the convenience retail sector and its low-cost offering is scalable. The directors believe there is “a significant opportunity” for further growth from the retail services offering and they think it can be achieved via its PayPoint One, parcel, and card payments products and services.
I think the PayPoint One platform is interesting. The product combines an Electronic Point of Sale (EPoS) machine with integrated bill payment, card and parcel services, and seems like a neat solution for many smaller retail outfits. In fact, the machine is live in around 13,248 sites and rising, which means more than 74% of PayPoint’s independent retailers are now using the platform. That strikes me as a massive take-up of the system suggesting it ticks a lot of boxes for the firm’s customers. The forward growth prospects of the system look exciting to me.
I reckon growth is on the way. In the meantime, the company is “committed” to its special dividend programme worth £25m per year, which is due to continue until December 2021. I think the shares are attractive.