Should you buy GUD Holdings Limited for its BIG dividend?

GUD Holdings Limited (ASX:GUD) shares are expected to provide a strong dividend in FY 2017. Is it worth investing today?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's fair to say it has been a bit of a mixed year for GUD Holdings Limited (ASX: GUD). Although back in July the company reported a full year loss of $43 million, that was mainly the result of GUD taking a $75.7 million non-cash impairment on its Dexion business.

The actual underlying result was much better, with underlying net profit after tax from continuing operations increasing a massive 36% year on year to $44.4 million.

Driving the strong underlying result was the growth of its automotive segment. Sales in the segment grew 127% year on year to $229.9 million, with earnings before interest and tax not far behind with a 107% jump to $66.7 million.

The good news is that management is putting a lot of focus on its automotive business and expects it to drive growth in FY 2017.

At the end of September GUD announced the acquisition of New Zealand-based automotive accessory wholesaler Griffiths Equipment.

Whilst the company is relatively small with sales of just $8 million per year, it will complement its existing New Zealand-based businesses which include the Ryco, Goss, Narva and Projecta brands.

At the recent AGM the company stated that it continues to see the automotive aftermarket as an attractive market for the company to build a presence in. It will have stiff competition in the form of Bapcor Ltd (ASX: BAP), but management appears confident that it can find significant opportunities in the sector.

As a result the company believes full year earnings before interest and tax will grow approximately 8% to $85 million in FY 2017. Although this growth isn't by any means explosive, it is definitely a big step in the right direction.

So with its shares expected to provide investors with a fully franked 5.3% dividend in FY 2017, I think GUD could be worth taking a closer look at. After all, in this low interest environment it is hard to find a yield of that level outside the banking sector.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Bapcor. 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.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »