Bull bar distributor ARB Corporation Ltd (ASX: ARP) has seen its shares climb 5.4% (66 cents) to $12.94, after announcing it will pay a fully franked special dividend of $1.00.
But don’t worry, you haven’t missed out. The dividend will be paid on December 5, with the ex-dividend date being Monday, November 17.
The company says it will pay out a total of $72.5 million, distributing a significant part of ARB’s accumulated franking credits. And shareholders can take the dividend as shares if they want, with the recommencement of ARB’s Dividend Reinvestment Plan (DRP) and the Bonus Share Plan for the special dividend only.
On the downside, the company is underwriting the DRP, meaning shareholders who take the dividend as cash will see their holding in the company slightly diluted. Those who do take the dividend as shares will also receive a 5% discount to the volume weighted average market price of ARB shares.
The company also announced today that it has achieved modest sales growth in the first quarter to September 30, with OEM sales, exports and Australian aftermarket sales all growing. But ARB says profit growth will be modest, due to lower margins on export and OEM sales and increased operating costs.
With Australia’s resources investment sliding, ARB is targeting sales in areas around the world where there is high demand for 4WD vehicles. The company it has also purchased its head office for $19 million, allowing it to renovate and reconfigure it as needed, and will also result in operational cost savings.
What is a concern is that ARB shares still appear expensive, trading on a forward P/E ratio of 18.7x, despite growth slowing dramatically in the past few years. Reflecting that, ARB shares have just kept pace with the S&P/ ASX 200 Index (Index: ^AXJO) (ASX: XJO) since February 2013, rising around 10%.
As the mining boom tapers off, sales may even end up falling, and Foolish investors may want to wait for a better price to pick up this quality company.