Are Harvey Norman Holdings Limited shares a buy for its fully franked dividend?

Credit: theunquietlibrarian

For investors seeking income, the shares of leading furniture, appliance and electronics retailer Harvey Norman Holdings Limited (ASX: HVN) have become a lot more attractive in recent years thanks to a significant rise in the group’s pay-out ratio.

Consider this:

Back in financial year (FY) 2013 the group paid out 47% of its earnings in dividends (according to data supplied by Morningstar); the following year in FY 2014 the pay-out ratio jumped to 68%; then last year the pay-out ratio increased again, this time to 82%!

The total dividend paid in FY 2015 was 20 cents per share and what’s more, according to consensus data (also from Morningstar) the dividend is expected to increase to 21.7 cps in the current financial year.

With the share price closing Tuesday’s trading session at $4.05, this implies a forward fully franked dividend yield of 5.3%.

Not only is that a higher yield than what the S&P/ASX 300 (Index: ^AXKO) (ASX: XKO) is offering, but it’s also higher than many of Harvey Norman’s peer group including JB Hi-Fi Limited (ASX: JBH) and Super Retail Group Ltd (ASX: SUL), which are trading on forecast yields of 4.9% and 4.1% respectively.

Buy, Hold or Sell?

With Harvey Norman holding a commanding, entrenched position within an industry which should benefit from both population growth and general economic growth the stock certainly meets a number of important investment metrics.

For long-term, income-seeking investors Harvey Norman could certainly be a stock for their watch list.


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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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