The JB Hi-Fi Limited (ASX: JBH) share price has gone up 74% over the past year, is it a buy for dividends?
Despite the excellent performance by the JB Hi-Fi share price, it still offers a grossed-up dividend yield of 5.1%.
I think that JB Hi-Fi is one of the best retail businesses in Australia. Many commentators including myself thought that the launch of Amazon Australia would lead to a decline for JB Hi-Fi. But it hasn't. Indeed, it has gone from strength to strength.
In FY19 it reported that total sales grew by 3.5% to $7.1 billion with net profit after tax (NPAT) increasing by 7.1% to $249.8 million – impressive after a decade of growth. The retailer managed to grow its revenue, profit and profit margin despite the economic slowdown in Australia and competition from Amazon Australia, Kogan.Com Ltd (ASX: KGN) and others.
If JB Hi-Fi's profit goes up then investors can probably expect the dividend will go up and the share price should follow over the long-term too.
Will JB Hi-Fi's earnings rise in FY20? Analysts seem to think so with a prediction of a slight improvement of earnings per share (EPS) compared to FY19. We'll soon learn in reporting season how JB Hi-Fi performed in the six months to 31 December 2019, which includes the important Black Friday, Cyber Monday and Christmas sales.
Overall, JB Hi-Fi thinks its sales will increase by around 2% in FY20. In the first quarter of FY20 the company saw JB Hi-Fi Australia sales rise by 4.7% with comparable sales growth of 3.7%. JB Hi-Fi New Zealand sales grew by 3.8% with comparable sales growth of 3.8%. However, The Good Guys sales fell by 0.5% with a comparable sales decline of 1.8%.
Foolish takeaway
JB Hi-Fi is trading at 18x FY20's estimated earnings. It doesn't look terribly expensive, but profit growth is projected to be slow going over the next few years to FY22. I can think of some shares that I'd rather buy for growth and dividends.
