Jason McCormickWhen thinking about dividend stocks on the ASX, banks and mining giants often steal the spotlight. However, the incredible surge of the Big Four banks has made their shares less appealing. What if there’s an under-the-radar company offering double the dividends alongside impressive growth potential?
Enter Smartgroup Corporation Ltd (ASX: SIQ), a standout in salary packaging, fleet management, and novated leases. While this billion-dollar company’s shares have dipped nearly 8% this year, this decline might offer a prime opportunity to investors. Primarily, Smartgroup is delivering a striking 6.2% dividend yield.
In the past year, Smartgroup paid out 49.5 cents per share in dividends. It’s crucial to note that a portion of this, 16 cents, was a special dividend—suggesting it may not be a regular occurrence. However, Smartgroup has distributed this special dividend for four consecutive years, hinting at potential ongoing payments.
The real allure of Smartgroup lies in its growth trajectory. With a 27% increase in revenue to $148.5 million and a 16% spike in profits to $34.1 million in its latest half-year results, the company defies expectations of a typical high-yield stock. Analysts predict earnings around $78 million by FY25, offering a forward P/E ratio of 14.
As shares recently traded at $8.01, the potential for capital appreciation seems promising, with some suggesting a fair value closer to $10.50. For those eyeing long-term gains, Smartgroup stands as an enticing prospect.
Smartgroup Corporation: Uncovering the Hidden Gem of ASX Dividend Stocks
When considering dividend stocks on the Australian Securities Exchange (ASX), the Big Four banks and mining corporations typically dominate the conversation. Yet, a lesser-known entity, Smartgroup Corporation Ltd (ASX: SIQ), emerges as a compelling alternative, boasting both attractive dividends and substantial growth potential.
Exploring Key Features and Innovations of Smartgroup
Diverse Services and Strong Financials:
Smartgroup, a leader in salary packaging, fleet management, and novated leasing, offers a unique blend of services under its domain. Despite a nearly 8% decline in share value this year, Smartgroup remains lucrative with a dividend yield of around 6.2%. Its recent half-year performance showed a remarkable 27% surge in revenue to $148.5 million, alongside a 16% increase in profits to $34.1 million.
Sustained Special Dividends:
A noteworthy aspect of Smartgroup’s dividend strategy is its consistent payout of special dividends—16 cents of the 49.5 cents per share paid last year. Although special dividends are generally less predictable, Smartgroup’s recurring distribution over the past four years indicates a potential for stability in shareholder returns.
Pros and Cons of Investing in Smartgroup
Pros:
– High Dividend Yield: Offers a 6.2% dividend yield, appealing to income-seeking investors.
– Growth Potential: Significant revenue and profit growth point toward robust business prospects.
– P/E Ratio: With a forward P/E ratio of 14, the stock could be undervalued, offering capital appreciation opportunities.
Cons:
– Special Dividend Uncertainty: While consistent, special dividends carry a level of unpredictability and may not continue indefinitely.
– Market Volatility: Share price fluctuations can affect short-term investment perspectives, though they may offer buying opportunities for strategic investors.
Predictions and Market Trends
Analysts are bullish on Smartgroup’s future, with projected earnings rising to approximately $78 million by the fiscal year 2025. This suggests sustained growth and potential price alignment closer to a projected fair value of $10.50 per share—significantly above the recent trading price.
For more information about Smartgroup’s offerings and investor insights, visit their official website at Smartgroup.
Long-term Investment Insights
For investors with a long-term outlook, Smartgroup’s track record of growth and dividends positions it as an enticing option. Its blend of high yields, innovative services, and promising forecasts creates a compelling narrative of potential success in the competitive ASX landscape.
