United Kingdom publisher Reed Elsevier Group is primarily a publishing and information services company. Investors looking at the stock, however, will find two American Depositary Receipt (ADR) shares trading in the United States: Reed Elsevier Plc (RUK) and Reed Elsevier NV (ENL). Fortunately, aside from a potential currency exchange play, the two ADRs provide investors with nearly identical returns.
Reed Elsevier is primarily a specialty publisher, both in print and electronic. The company owns Elsevier, providing scientific, technical, and medical publishing. LexisNexis provides information databases mainly for the legal and insurance industries. Reed Exhibitions organizes conferences and trade shows, and Reed Business Information provides data and marketing information to commercial customers.
Reed Elsevier Group Plc is jointly owned by the U.K.’s Reed Elsevier Plc (trading in pence), and the Netherlands’ Reed Elsevier NV (trading in euros). Each ADR share of RUK represents four of the U.K. shares, while each ADR share of ENL is backed by two Netherlands shares.
Slow growth, nice dividends
For the first half of 2011, Reed Elsevier saw net income increase by 5 percent. The combination of businesses generates sufficient cash flow in the current economy, but growth must wait for better economic conditions. The dividend is paid semi-annually, with a smaller payout mid-year and one three times larger at the end of the year. Over the last three years, the U.K. shares have paid a total of 20.5 pence, working out to $1.306 per RUK share in 2010.
In the first half of 2011, the company increased the distribution by 4.5 percent, which worked out to a 10 percent increase for ADR holders. For the ADRs, the current yield is over 4 percent.
The unique share arrangement for the Reed Elsevier Group provides investors with an opportunity to triangulate the three currencies, picking the shares with the most favorable exchange rates. ADR prices, however, have moved together during the last five years. A weak dollar in relation to the pound or euro is a positive for the dividend that a U.S. ADR investor can earn.
The company next reports in February 2012.
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