This week's top dividend buy for me is Automotive Holdings Group Ltd (ASX: AHG). It is a diversified automotive retail and logistics group with operations in Australia and New Zealand. It operates passenger vehicle, bus & truck dealerships for most of the major brands.
Here are some of its key metrics:
- Dividend yield. Automotive Holdings Group has a fully franked dividend yield of 5.6% compared to a market average of 3.8% and a sector average of 4.6%. AP Eagers Ltd (ASX: APE) which owns a stake in Automotive Holdings has a dividend yield of 4.8%.
- Dividend payout ratio. Automotive Holdings has a dividend payout ratio of 62% i.e. 62% of its FY 2017 profits were paid out as a dividend. This suggests that its dividend amount is fairly sustainable and can be maintained should earnings drop slightly.
- Dividend growth rate. Automotive Holdings has an average 5 year dividend growth rate of 1.1% which isn't much when compared to AP Eagers' 5 year average dividend growth rate of 17% but is still better than a long term negative growth rate.
- Dividend stability. Automotive Holdings has a dividend stability of 97.1% compared to a sector average of 96.1%. Its earnings stability rate of 51.4% is also slightly higher than the market average of 45.7%.
- Gearing: In its FY 2017 annual report, the company disclosed a traditional gearing ratio (net debt divided by total capital under management) of 56.6%. The automotive retail industry utilises a relatively unique funding structure in relation to its vehicle inventory holdings, whereby the majority of inventory is specifically financeable. On this basis, Automotive Holdings considered that the exclusion of these finance company loans from net debt and total assets reflects a more appropriate gearing ratio specific to the automotive industry and more reflective of the substance behind the traditional gearing ratio. As such, they determined a gearing ratio of 24.4% on this basis.
- Valuation. Automotive Holdings has a lower PE ratio of 12 (compared to a sector average of 14 and a market average of 17). It also has a lower price to book ratio of 1.43 (compared to a sector average of 1.65 and a market average of 1.62).
Overall Automotive Holdings Group looks to be a solid dividend stock, but if dividends aren't for you and you are looking for some fast growing innovative companies, try these disruptors.
