My top dividend buy this week: Automotive Holdings Group Ltd

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.

The Disruptors: 3 Revolutionary Aussie Companies to Back for 2018

We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Cochlear or REA Group.

We’ve found three exciting companies that we believe re poised to perform in the new year. Click here to uncover these ideas!

Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can follow Kevin on Twitter @KevinGandiya.

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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!