The Redcape (ASX:RDC) share price is flying 5% higher today. Here’s why

The Redcape (ASX: RDC) share price is surging today after the company announced an upgrade to its FY21 guidance.

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The Redcape Hotel Group Pty Ltd (ASX: RDC) share price is surging today after the company announced an upgrade to its FY21 guidance.

Redcape shares are up 5.6% at the time of writing, trading at $1.03.

Redcape owns and operates pubs and hotels across New South Wales and Queensland, offering gaming, food and beverage, and also liquor through retail bottle shops.

Redcape’s increased dividends

Redcape upgraded its dividend guidance after it reported continued strong trading in its third quarter of FY21.

The company now expects its underlying earnings to rise to 10.2 cost-per-share (cps), after initially projecting 9.7 cps. It’s lifted its fourth-quarter dividend distribution to 2.67 cps, from 1.83 cps in the previous guidance.

Redcape has also increased its full-year distribution, for the financial year ended 30 June 2021, to 8.16 cps. This represents an  11.5% uplift against the company’s previous guidance.

The lift in the company’s fourth-quarter dividend distributions represents an annualised yield for this financial year of 8.3%.

The company attributed its ability to raise its distribution to “strong liquidity” and “earnings resilience”. Its distribution payment date is 30 August this year.

Redcape is also currently acquiring more hotel properties for its portfolio.

It recently settled two additional Sydney properties, O’Donoghue’s Hotel at Emu Plains and The Gladstone Hotel at Dulwich Hill. Meanwhile, it expects to settle its two recent Brisbane hotel acquisitions, the Aspley and Shafston hotels, on 17 May 21.

Management comments

Redcape CEO Dan Brady said the new guidance highlighted the company’s strong performance.

This is a clear demonstration that our dedicated focus to enhance our local communities through the Public Communities program is resonating with our customers. Our continued attention on improving staff and customer engagement highlights the overall resilience of our portfolio as we return to growth.

Redcape share price snapshot

The Redcape share price has lifted almost 9% over the past month and is up 10% since the start of 2021.

Shares in the company are also up over the past 12 months, lifting by more than 43% despite enduring shutdowns due to the coronavirus pandemic.

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Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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