Stock Analysis

JB Hi-Fi (ASX:JBH) Has Announced That It Will Be Increasing Its Dividend To AU$1.07

  •  Updated
ASX:JBH
Source: Shutterstock

The board of JB Hi-Fi Limited (ASX:JBH) has announced that it will be increasing its dividend on the 10th of September to AU$1.07. This will take the dividend yield from 5.9% to 5.9%, providing a nice boost to shareholder returns.

See our latest analysis for JB Hi-Fi

JB Hi-Fi's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by JB Hi-Fi's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 0.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could reach 85%, which is definitely on the higher side.

historic-dividend
ASX:JBH Historic Dividend August 21st 2021

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was AU$0.96 in 2011, and the most recent fiscal year payment was AU$2.87. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. JB Hi-Fi has seen EPS rising for the last five years, at 22% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

JB Hi-Fi Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for JB Hi-Fi (of which 1 is significant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

When trading JB Hi-Fi or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether JB Hi-Fi is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis