Stock Analysis

Jardine Matheson Holdings' (SGX:J36) Shareholders Will Receive A Bigger Dividend Than Last Year

SGX:J36
Source: Shutterstock

Jardine Matheson Holdings Limited's (SGX:J36) periodic dividend will be increasing on the 15th of May to $1.65, with investors receiving 3.1% more than last year's $1.60. This makes the dividend yield 5.6%, which is above the industry average.

View our latest analysis for Jardine Matheson Holdings

Jardine Matheson Holdings' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Jardine Matheson Holdings' dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 40% which is fairly sustainable.

historic-dividend
SGX:J36 Historic Dividend March 10th 2024

Jardine Matheson Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $1.35 in 2014, and the most recent fiscal year payment was $2.20. This means that it has been growing its distributions at 5.0% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Jardine Matheson Holdings' EPS has declined at around 25% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Jardine Matheson Holdings' payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Jardine Matheson Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Jardine Matheson Holdings that investors should take into consideration. Is Jardine Matheson Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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

Find out whether Jardine Matheson Holdings 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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

About SGX:J36

Jardine Matheson Holdings

Through its subsidiaries, operates in motor vehicles and related operations, property investment and development, food retailing, health and beauty, home furnishings, engineering and construction, and transport businesses in China, Southeast Asia, and internationally.

Excellent balance sheet established dividend payer.