Dividend yields just got bigger at ITV, G4S and JD Wetherspoon

Each of these big names has run into problems this year, but today's losses are substantial. It is, however, good news for income seekers. Graeme Evans reports.

A frustrating year for shares in ITV and G4S continued today, despite the best efforts of their respective CEOs to talk up prospects in the face of toughening economic conditions.

Shares in the high-yielding FTSE 100 broadcaster and mid-cap support services struggler fell sharply following trading updates, with ITV down 5% due to the weak advertising outlook in the current quarter. G4S was 15% cheaper after failing to match the City's quarterly sales forecast.

Their updates were not the only ones punished, despite a session in which the FTSE 100 index was in charitable mood. As well as the latest trading blow from Marks & Spencer, mid-cap stock JD Wetherspoon slumped 10% as the pub chain revealed that higher wage costs may mean results below the previous year.

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The weakness at ITV followed CEO Carolyn McCall's warning that total advertising revenues would be down 3% in the current quarter and broadly flat over the full year. This figure, which includes sponsorship revenues, had been up 2% in the first nine months of 2018, driven by 43% growth in online revenues.

Unsurprisingly, it appears that consumer brands are being cautious about committing to big advertising campaigns whilst the terms of Britain's exit from the EU in March are still unclear.

McCall can only focus on the areas of the business "which are under our control", such as investment and the cost saving programmes she set out in July.

She said:

"We are making good progress with implementing the strategy."

Source: TradingView     Past performance is not a guide to future performance

An increased focus on ITV Studios has reduced reliance on UK advertising income, although this area still represents a significant proportion of revenue - putting ITV at the mercy of a decrease in spending on ads.

As well as the Q4 weakness, UBS analyst Richard Eary highlighted lower Studios organic growth and additional property costs for driving a 3% to 5% downgrade to consensus 2019 earnings estimates. He has a price target of 160p.

The share price over the last year has been held back by investors waiting to see how the ITV strategy is unfolding, with the stock now down 13% since January.

McCall's decision to pull the plug on the company's five-year record of paying a special dividend hasn't helped, although the stock still yields over 5%.

On the face of it, today's update from security company G4S looks respectable with revenues growth of 2.5% rallying from 0.2% in the first half.

However, UBS analyst Bilal Aziz notes that this is still a slowdown from 2.8% in the second quarter and below the City's 3% consensus forecast. While growth was strong in technology -enabled solutions on easier comparisons, the cash solutions division was impacted by Benelux weakness.

G4S CEO Ashley Almanza said a tight labour supply was expected to constrain revenues growth over the rest of 2018, but that new contract wins and a substantial, high quality pipeline provided "good momentum into 2019".

His optimism is backed by UBS, with a price target of 300p. The stock, which yields 4.5%, has fallen 28% since the New Year and by 33% since August.

Source: TradingView     Past performance is not a guide to future performance

Labour issues are also a concern at Wetherspoons, with chairman Tim Martin revealing today that wage pressures caused by record low unemployment would mean pay rises for staff from this week.

He said:

"Having had several years of record profits, we are not immediately seeking to recoup these increased costs through higher pricing or mitigation, but will review that during the year."

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It's still early in the financial year but Martin said the company now expected annual profits to be slightly lower, having posted £107.2 million in September.

Today's 12% fall for shares took some of the froth from a stock that has been trading with a price/earnings multiple above 20x.