Yahoo Finance Jardine group provides dividend play potential as share prices encounter support
Jardine group stocks' trading lows could be supported by dividends
The Jardine group’s sell off may provide some trading ideas for yield seekers as dividend plays. For instance, Jardine C&C’s “underlying” net profit rose by 6% to US$1.16 billion. As a result its dividends per share rose by 6% to US$1.18 giving a yield of 4.8%. Jardine C&C fell to a 23-month low before rebounding on March 8.
Jardine Matheson’s share price is at a 5- year low at its March 8 price of US$39.11. The last time JMH tested US$39.20 was in 2020, during the depths of the pandemic. At this price, its FY2023 dividend of US$2.25, up 5% y-o-y, provides a dividend yield of 5.7%. JMH’s “underlying profit” rose by 5% y-o-y in FY2023 to US$1.66 billion.
The common theme is, as long as there is underlying profit growth, that will fuel dividend growth. Unlike S-REITs, these payout ratios are less than 50%, providing the opportunity for these companies to raise their retained earnings and hold on to their net asset values. Jardine C&C’s payout ratio is 40% based on underlying profits, and JMH’s payout ratio is 39%.
The Group uses ‘underlying profit attributable to shareholders’ in its internal financial reporting to distinguish between ongoing business performance and non-trading items as management considers this to be a key measure which provides additional information to enhance understanding of underlying business performance.
Hongkong Land made a net loss in FY2023 because of fair value losses on its properties. Based on the Jardine group’s underlying profit, HK Land would have made a profit of US$734 million, down 5% y-o-y. Despite this, HK Land has maintained its dividend at 22 US cents per share. Unlike Jardine C&C and JMH, HK Land’s share price rebounded sharply from a low of US$3.09 on March 6 to end the week at US$3.24 on March 8. Technically, HK Land could have room to rebound all the way to US$3.43 before it encounters resistance.
While the Jardine group steadily raises its dividends depending on earnings growth, the group appears to prefer using share buybacks as a shareholder value instrument. HK Land has bought back more than US$1 billion in a 2 year period, but to no avail in terms of share price action as it still hovers around a multi-year low. The stock is also trading at a 0.22x NAV.
Of the three, Jardine C&C is mildly oversold technically. HK Land has established a support at $3.09 and JMH is also near a support area.
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