MENU

Is Kogan.Com Ltd (ASX:KGN) now a dividend share with its 3.7% yield?

There are few shares that have fallen further than Kogan.Com Ltd (ASX: KGN) recently, it’s down 46% over the past five months.

Several reasons could be the cause of this drop. Management selling a decent chunk of their shares didn’t help confidence. There has also been a large drop in the valuation of ‘growth’ shares. Plus, Amazon is stepping up its presence in Australia.

In FY18 Kogan revealed an impressive set of numbers. Revenue grew by 42.4% to $412.3 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 108% to $26 million. It grew its active number of customers by 45% to nearly 1.4 million people and ended with a net cash position on the balance sheet of $42.6 million.

Kogan reported earnings per share (EPS) of $0.15, meaning it’s trading at 33x FY18’s earnings and it has a trailing grossed-up dividend yield of 3.7%. It would only take the dividend to increase by 10% in FY19 for it to have a yield of more than 4%.

Kogan proudly boasted of doubling the profit each year for the past three years, so there could be a good chance of it growing profit by 33% (or more) in FY19, suggesting a PEG of 1 or less.

All the numbers seem very compelling. Plus, all the additional services such as Kogan Money should add to Kogan’s growing profit network, allowing it to sell more products to the same customers.

It certainly makes me tempted to invest. However, there is a big question mark around competition.

Amazon is quite happy to operate at breakeven (or a loss) whilst it expands. Internet shoppers can very easily compare the prices of a product on Kogan and Amazon, then choose the cheapest. As Amazon Australia’s scale gets bigger it will be able to offer lower prices. However, Kogan does sell some products on Amazon.

Kogan operates on low, but growing, margins. It wouldn’t take much price competition to lose a chunk of earnings.

Foolish takeaway

It appears Kogan could be worth an investment at today’s price. Whilst Amazon is a big competitor, Kogan can win a lot of business from bricks and mortar stores like JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN)  – the pie is certainly big enough for Kogan and Amazon for now.

Another top ASX share that’s well positioned to keep growing despite Amazon’s arrival is this exciting growth share that’s now expanding into Asia.

The best dividend stock to buy this month

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Kogan.com ltd. 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 Scott Phillips.

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…

Including:

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!