Stock of the week: TUI
In its full year results reported last week the largest tourism group in the world, TUI, reported a 1.4% increase in revenue to €17.2bn and pleased shareholders by increasing the dividend by 12.5% to 63 cents. Investors should appreciate that despite ongoing global geopolitical concerns over the past year, the company reiterated that trading for 2017 is in line with expectations.
The company is gaining profits from more diverse sources, including cruise holidays which are becoming more popular among younger people and families. The shares trade on a 2017 PE ratio of 11.1, which is low compared to peers, and a price to book value of 2.8 times, which is about average for its peer group. Investors should note that the firm’s prospective dividend yield of 5.1% is relatively good and dividends are expected to rise over the next three years.
We continue to recommend TUI as a ‘buy’ for higher risk investors seeking a mixture of growth and income due to the long term growth potential, the healthy dividend and reducing competition in the sector.