In the global investing world we live in, it is important to look at opportunities worldwide when seeking the best returns. Here, we will take a look at some of the investments the United Kingdom has to offer. By no means is this a complete analysis of the entire nation, that would be a series of articles in itself. Instead it is a starting point for those who are interested in looking across the pond.
A Big European Airline
British Airways is probably the airline that most think of when British air travel is mentioned. The airline has a long history including such events as its own privatization and as one of the largest operators of the supersonic Concorde passenger jet. In early 2011, a merger between British Airways and Spain’s Iberia formed the airline now known as International Consolidated Airlines Group SA (OTCMKTS:ICAGY). The merger follows in line with a broader trend in the industry that seeks to reduce both redundant costs and competition. Prior to the British Airways-Iberia merger, Delta Air Lines, Inc. (NYSE:DAL) and Northwest Airlines combined in 2008 and United Airlines and Continental Airlines tied the knot in 2010.
For airlines, networks are critical to offering their customers ideal flights and, consequently, retaining and attracting customers. With the business center that is London, London Heathrow Airport is seeing high demand for slots (takeoff and landing privileges) due to both the business aspect and the restriction on the expansion of the airport. The recent purchase of a $360 million equity stake in Virgin Atlantic Airways Limited by Delta Air Lines, Inc. (NYSE:DAL) was largely done to gain access to Virgin’s Heathrow slots showing how in demand Heathrow slots are. Fortunately for British Airways, the airline has a strong presence at Heathrow and controls a large percentage of the slots giving it the opportunity to offer more of the popular Heathrow flights appealing to high spending business travelers.
But things aren’t all great for the airline group. Europe is still fighting with recession, the U.K. is barely growing, and Spain has both debt problems and an unemployment rate of more than 25 percent. While large airlines are part of a global business, economic problems at home could still hurt the airline group. However, the airline group does offer a way for investors to play both a more profitable airline industry and a European economic recovery.
Dividend telecom
British telecom company Vodafone Group Plc (ADR) (NASDAQ:VOD) has been making headlines lately but not for reasons to do with its mainline operations.
It’s because Verizon Communications Inc. (NYSE:VZ) is considering a bid for Vodafone’s 45 percent stake in the Verizon Wireless joint venture. A report surfaced that Verizon Communications Inc. (NYSE:VZ) was preparing to offer a bid of US$100 billion for the stake. But many Vodafone Group Plc (ADR) (NASDAQ:VOD) investors do not consider this bid, which would require a great deal of capital raising on Verizon Communications Inc. (NYSE:VZ)’s part, to be a fair valuation of JV stake.
Vodafone Group Plc (ADR) (NASDAQ:VOD) investors want a bid above US$120 billion before they will consider the potential offer further. But some investors want to create an even bigger deal that would involve merging Verizon Communications Inc. (NYSE:VZ) with Vodafone. This potential mega merger is still mere market speculation but it is worth keeping an eye on for both Verizon Communications Inc. (NYSE:VZ) and Vodafone Group Plc (ADR) (NASDAQ:VOD) investors.
Those interested in holding Vodafone Group Plc (ADR) (NASDAQ:VOD) shares could collect the company’s dividend of nearly 5 percent. With negative earnings, the dividend is unlikely to see any increases in the near future and could even come under threat if the company’s fortunes turn south. Verizon Communications Inc. (NYSE:VZ)’s dividend is nearly 4 percent meaning a merger between the two companies would not pose a significant threat to the dividend and may even provide stability to it due to the increased size of the company.
Two big companies
With market capitalizations of US$7.9 billion and US$149.6 billion respectively (as of Apr. 30), International Consolidated Airlines Group SA (OTCMKTS:ICAGY) and Vodafone Group Plc (ADR) (NASDAQ:VOD) are both major players in their industries. Both companies have a reach far beyond the U.K. itself but are not immune from troubles in their home country. With slow growth in the U.K., many investors are still hesitant about investing in the country. It’s therefore up to individual investors to do further research and decide whether they want to invest in U.K. based companies whether they’re listed here or not.
The article A Tour Of Countries: United Kingdom originally appeared on Fool.com is written by Alexander MacLennan.
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