Why this top dividend share is storming higher today

The market may have dropped notably lower today, but that hasn’t stopped the Ruralco Holdings Ltd (ASX: RHL) share price from storming higher.

In morning trade the agribusiness company’s shares are up 4% to $3.03.

Why are Ruralco’s shares storming higher?

Hot on the heels of the Elders Ltd (ASX: ELD) full year result yesterday, Ruralco released its own results this morning.

And as you might have guessed from the share price reaction, these results were better than many had expected.

In FY 2018 Ruralco achieved a 5% increase in revenue to $1,900 million and a 10% lift in underlying net profit after tax to $28.8 million. The latter was at the top end of the guidance range management provided.

The company’s successful year was largely down to its geographical and activity diversification easing the impact of mixed seasonal conditions and challenging trading conditions.

The company’s CEO, Travis Dillon, was pleased with the result and the resilience of the Ruralco business model.

He said: “The drought in many parts of the country this year has tested our strategy and reinforced the importance of building a diversified earnings base across our activities and geographies. The fact that the Company has achieved profit growth despite the difficult seasonal conditions confirms the sustainability of Ruralco’s business model.”

Earnings per share came in at 27.5 cents, allowing the board to declare a final fully franked dividend of 6 cents per share. This brought it full year dividend to 15 cents per share, meaning its shares offer a trailing 4.95% yield at the current share price.

Looking ahead, management is cautiously optimistic on its prospects in FY 2019. It has pointed to spring rainfall, the continued buoyancy in the sheep and wool markets, and current stable cattle prices as reasons to be positive on the year ahead.

Should you invest?

Based on this result Ruralco’s shares are trading at just 11x earnings. Which I think is about fair given its current growth profile and the tendency for agricultural shares to trade on lower multiples.

While I would still choose Rural Funds Group (ASX: RFF) ahead of it, Ruralco certainly is far behind.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia has recommended Elders Limited. 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.

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