Jardine Strategic Holdings Limited (SGX: J37), or JS, is a conglomerate with interests in the web of Jardines companies such as Jardine Cycle & Carriage Ltd (SGX: C07), Hongkong Land Holdings Limited (SGX: H78), Dairy Farm International Holdings Ltd (SGX: D01) and Jardine Matheson Holdings Limited (SGX: J336).
One of the main reasons that retail investors have generally stayed away from Jardine Strategic is due to the complexity of its businesses, as well of its web of ownership in various entities across the group. Still, if investors are willing to carry out some work studying this company, they might find some good traits to like about this company.
In this article, I’ll point out two reasons why Jardine Strategic could be a great dividend stock to consider.
Solid business performance
Investors in Jardine Strategic will make money in two ways – an increase in the share price and dividend payments. Both factors depend on the company’s ability to sustain and grow its profits in the long run.
And here’s what we want to highlight – Jardine Strategic has a solid track record in growing its business. From 2008 to 2018, Jardine Strategic grew its revenue from US$18.5 billion to US$34.1 billion. What’s more, underlying profit attributable to shareholders grew from US$859 million to US$1.8 billion. Similarly, underlying earnings per share (EPS) grew from US$1.12 to US$3.14. To put that into perspective, EPS grew by a compound annual growth rate (CAGR) of 10.9% during the decade!
As we can see from the above, Jardine Strategic has done well historically in growing its profitability. Though past results are no guarantee of future performance, investors can get some comfort from knowing that the company has demonstrated its ability to sustain and grow its business.
Another important criteria that investors look for before investing in a dividend stock is the company’s dividend track record. The key here is to look for stable, or even better, increasing dividend payments over the years.
In the case of Jardine Strategic, investors would expect to have sees growing dividend payments in the last decade since it has been growing its profitability over that period. The good news is that Jardine Strategic did exactly that! During the decade, it has grown its dividend per share (DPS) from US$0.19 to US$0.34. In other words, its dividend was up by 79% during the period.
Clearly, the growth in DPS has lagged the growth in EPS. This is due to Jardine Strategic reinvesting its profits back into the business to further grow its profitability. In the long run, however, it’s likely that growth in the dividend will catch up with the growth in profits.
Overall, we can see that Jardine Strategic is a solid candidate for dividend investors to research further given its strong track record in growing its business, as well as dividends, over the past decade.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended the shares of Hongkong Land and Dairy Farm.
Motley Fool Singapore 2019