High dividend yielding stocks have, in general, outperformed the broader market in 2011, as increased volatility and uncertainties had investors gravitating towards lower risk investment options.
These stocks could outperform again this year if investors remain risk-averse. Conversely, they could lag if the outlook brightens, in which case higher beta stocks are expected to fare better. Much still depends on how global events pan out over the coming months. In the meantime, we are highlighting two more companies that are sitting on cash and could raise their dividend payout levels.
Panamy likely to keep dividends at RM1.45 per share at least
Panasonic Manufacturing Malaysia Bhd (Panamy) has quite a cash pile on its balance sheet — totalling RM446.5 million or RM7.35 per share as at end-September 2011.
The company raised gross dividends to RM1.45 per share for the financial year ended March 2011 (FY11) from RM1.20 per share for FY10. The higher dividends reflect its stronger earnings — net profit grew 27% year-on-year (y-o-y) to RM82.7 million in FY11.
We believe Panamy’s underlying earnings will continue to improve in FY12. Net profit in 1HFY12 declined 5.2% y-o-y to RM39.1 million due primarily to derivative loss amounting to RM4 million compared with a loss of just RM127,000 in the previous corresponding period. Excluding this, the company’s underlying earnings actually grew some 4.3% y-o-y despite a stronger ringgit that eroded export revenue.
With the ringgit reversing course in 4Q11, we expect the company to see better margins in 2HFY12, which will help offset the short-term negative impact on export sales as a result of last year’s flood crisis in Thailand.
On balance, we forecast Panamy’s underlying earnings growth at about 5% in FY12. Net profit is, however, estimated at a slightly lower RM80.7 million after including the RM4 million in derivative loss. Net profit should improve in FY13 without the extraordinary loss; we forecast to about RM87.3 million.
Thus, we expect the company will maintain, at least, its dividends at RM1.45 per share in FY12 before raising it to some RM1.50 per share in FY13. This is assuming a fairly conservative average payout of roughly 80% of earnings for the two years, which also means its cash pile will continue to build.
Based on our estimates, shareholders will earn fairly good net yields of 5.4% and 5.6% at the current share price of RM20. The stock posted decent gains in 2011, giving investors returns, including dividends, totalling some 14.2%.
Given that its shares are still trading at relatively modest price-earnings of roughly 14.2 times our annualised earnings forecast for 2012 — relative to other high-yielding consumer stocks — we believe there could be further upside.
Dutch Lady on track for fresh record high profits
Another stock that did very well in 2011 was Dutch Lady Milk Industries Bhd. Its share price gains plus dividends netted shareholders returns totalling nearly 38% last year.
The company is set to report strong earnings for 2011 that will eclipse the previous year’s record high of RM63.9 million. In the first nine months of the year alone, net profit totalled RM79.7 million, 50% higher than that recorded in the previous corresponding period.
This can be attributed to a confluence of factors, including higher topline sales on rising demand for its liquid and powder diary products (which were up some 9.7% y-o-y), favourable sales mix and higher selling prices.
Whilst higher dairy raw material prices and the weaker ringgit are expected to exert some downward pressure on margins in 4Q11 — and 2012 — we still expect earnings to expand. Net profit is estimated at RM97.3 million and RM99.7 million for 2011 and 2012 respectively.
The higher earnings and a strong balance sheet should translate into better dividends. Net dividends totalled 72.5 sen per share in 2010, or about 72.6% of profits for the year. Dutch Lady had already paid net interim dividends totalling 60 sen per share last year. We believe there will be a final dividend when its 4QFY11 results are released in the coming weeks.
Assuming a similar payout level as 2010, net dividends would total roughly RM1.10 per share for 2011 and rise to RM1.13 sen per share in 2012. That would earn shareholders decent net yields of 4.2% and 4.3% for 2011 and 2012 respectively at the current share price of RM26.20.
Dutch Lady’s cash position has been strengthening over the past few years. Net cash has improved from just RM0.9 million at end-2007 to RM145.8 million as at end-September 2011, or about RM2.28 per share. As such, we do not discount the possibility of higher dividend payout or special dividends in the near future. If so, we may see further upside gain for the stock. Its shares are now trading at about 16.8 times our estimated earnings for 2012, which although is higher than the broader market’s average valuations, remains far below the prevailing valuations for Nestle (M) Bhd. The latter is currently trading at over 27 times our earnings estimate for 2012.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
This article appeared in The Edge Financial Daily, January 13, 2012.
These stocks could outperform again this year if investors remain risk-averse. Conversely, they could lag if the outlook brightens, in which case higher beta stocks are expected to fare better. Much still depends on how global events pan out over the coming months. In the meantime, we are highlighting two more companies that are sitting on cash and could raise their dividend payout levels.
Panamy likely to keep dividends at RM1.45 per share at least
Panasonic Manufacturing Malaysia Bhd (Panamy) has quite a cash pile on its balance sheet — totalling RM446.5 million or RM7.35 per share as at end-September 2011.
The company raised gross dividends to RM1.45 per share for the financial year ended March 2011 (FY11) from RM1.20 per share for FY10. The higher dividends reflect its stronger earnings — net profit grew 27% year-on-year (y-o-y) to RM82.7 million in FY11.
We believe Panamy’s underlying earnings will continue to improve in FY12. Net profit in 1HFY12 declined 5.2% y-o-y to RM39.1 million due primarily to derivative loss amounting to RM4 million compared with a loss of just RM127,000 in the previous corresponding period. Excluding this, the company’s underlying earnings actually grew some 4.3% y-o-y despite a stronger ringgit that eroded export revenue.
With the ringgit reversing course in 4Q11, we expect the company to see better margins in 2HFY12, which will help offset the short-term negative impact on export sales as a result of last year’s flood crisis in Thailand.
On balance, we forecast Panamy’s underlying earnings growth at about 5% in FY12. Net profit is, however, estimated at a slightly lower RM80.7 million after including the RM4 million in derivative loss. Net profit should improve in FY13 without the extraordinary loss; we forecast to about RM87.3 million.
Thus, we expect the company will maintain, at least, its dividends at RM1.45 per share in FY12 before raising it to some RM1.50 per share in FY13. This is assuming a fairly conservative average payout of roughly 80% of earnings for the two years, which also means its cash pile will continue to build.
Based on our estimates, shareholders will earn fairly good net yields of 5.4% and 5.6% at the current share price of RM20. The stock posted decent gains in 2011, giving investors returns, including dividends, totalling some 14.2%.
Given that its shares are still trading at relatively modest price-earnings of roughly 14.2 times our annualised earnings forecast for 2012 — relative to other high-yielding consumer stocks — we believe there could be further upside.
Dutch Lady on track for fresh record high profits
Another stock that did very well in 2011 was Dutch Lady Milk Industries Bhd. Its share price gains plus dividends netted shareholders returns totalling nearly 38% last year.
The company is set to report strong earnings for 2011 that will eclipse the previous year’s record high of RM63.9 million. In the first nine months of the year alone, net profit totalled RM79.7 million, 50% higher than that recorded in the previous corresponding period.
This can be attributed to a confluence of factors, including higher topline sales on rising demand for its liquid and powder diary products (which were up some 9.7% y-o-y), favourable sales mix and higher selling prices.
Whilst higher dairy raw material prices and the weaker ringgit are expected to exert some downward pressure on margins in 4Q11 — and 2012 — we still expect earnings to expand. Net profit is estimated at RM97.3 million and RM99.7 million for 2011 and 2012 respectively.
The higher earnings and a strong balance sheet should translate into better dividends. Net dividends totalled 72.5 sen per share in 2010, or about 72.6% of profits for the year. Dutch Lady had already paid net interim dividends totalling 60 sen per share last year. We believe there will be a final dividend when its 4QFY11 results are released in the coming weeks.
Assuming a similar payout level as 2010, net dividends would total roughly RM1.10 per share for 2011 and rise to RM1.13 sen per share in 2012. That would earn shareholders decent net yields of 4.2% and 4.3% for 2011 and 2012 respectively at the current share price of RM26.20.
Dutch Lady’s cash position has been strengthening over the past few years. Net cash has improved from just RM0.9 million at end-2007 to RM145.8 million as at end-September 2011, or about RM2.28 per share. As such, we do not discount the possibility of higher dividend payout or special dividends in the near future. If so, we may see further upside gain for the stock. Its shares are now trading at about 16.8 times our estimated earnings for 2012, which although is higher than the broader market’s average valuations, remains far below the prevailing valuations for Nestle (M) Bhd. The latter is currently trading at over 27 times our earnings estimate for 2012.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
This article appeared in The Edge Financial Daily, January 13, 2012.
