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Why REA Group Limited should be worried about Domain

REA Group Limited (ASX: REA) is an ASX success story.

In the past 10 years, REA’s share price has gone from $7.44 to close on Friday at $73.42, representing a gain of about 890%.

REA, with a market cap of $9.67 billion, is a multinational digital advertising business which specialises in property and operates the website iProperty.com, which has a presence in Asia.

The company, most notably, is a leading Australian residential, commercial and share-house advertiser, with the titles realestate.com.au, realcommercial.com.au and flatmates.com.au.

In FY17 REA, with a majority interest owned by News Corp (ASX: NWS), reported a net profit of $228.3 million, up 16% on the previous year.

The board also declared a final dividend of 51 cents per share, fully franked.

This figure added to a total dividend of 91 cents per share for FY17, representing a 12% increase on the prior year.

REA Group has enjoyed being the dominant Australian-listed company with an emphasis on digital real estate advertising.

REA Group CEO, Tracey Fellows, said FY17 produced an “exceptional result” which was driven by the company’s “focus to create the best products and experiences that deliver outstanding value” for its customers.

“In Australia, we have extended our position as the clear market leader, with our audience growth reaching record highs against our nearest competitor,” Ms Fellows said.

And while REA will continue to command a strong presence in the sector it is likely it will take a keen interest in recent developments which are sure to have an impact on the company.

Last week, Fairfax Media Limited (ASX: FXJ) shareholders voted overwhelmingly in favour of plans to separate its lucrative real estate business, Domain.

Fairfax’s spin off plans are scheduled to be heard by a Federal Court today.

Domain shares are due to start trading on the ASX on a deferred settlement basis on Thursday, 16 November 2017, pending the Court’s approval.

And when Domain hits the ASX investors will have another option to get in on the lucrative digital real estate advertising space.

A Big, Fat, Fully Franked Dividend

This company's dividend is almost the stuff of legends. Since it started paying dividends in 2007, it has increased its payout to shareholders every single year, a run that includes 21 consecutive dividend increases.

Based on the last 12-months of dividends, its shares are currently offering a fully-franked 4.8% yield, which grosses up to almost 7% when those franking credits are included.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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