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.
See also: STI steadies despite overbought US markets and rising US risk-free rates
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.
See also: Trumpian future of higher deficits, tariffs, point to inflation and higher interest rates
