The Super Retail Group Ltd (ASX: SUL) share price has been a strong performer over the last six months.
During this period, the retail conglomerate’s shares have charged an impressive 42% higher.
Can the Super Retail share price go even higher?
If you missed out on the stellar gains made by the Super Retail share price over the last six months, don’t worry. This is because one leading broker believes they can go a lot higher from here.
In response to its impressive trading update earlier this week, Goldman Sachs has reiterated its buy rating and lifted the price target on Super Retail’s shares to $14.80.
Based on the current Super Retail share price, this price target implies potential upside of 29% for its shares over the next 12 months. This potential return increases to almost 36% when you include the generous dividends the broker is expecting the company to pay.
Goldman Sachs has forecast a fully franked dividend of 78 cents per share in FY 2021. This equates to a 6.8% dividend yield at present.
Why is Goldman Sachs bullish on Super Retail?
The broker believes Super Retail is perfectly positioned to benefit from the current trading environment. It explained:
“SUL has continued to position itself extremely well to capture the unique trading environment we have seen over much of 2020, and in particular has made the most of the reopening of the Australian economy as households have increasingly shifted to outdoor activities and road travel over the summer period.”
“As we have noted before, while much of the consumer spending patterns seen over 2020 are unlikely to be sustained, we expect the international travel restrictions associated with the pandemic to provide a medium-term tailwind to SUL. Furthermore, the weakness experienced by SUL during the post bushfire period in 2H20 is likely to provide an easy base to cycle.”
In respect to its expectation for a big dividend this year, the broker commented:
“We forecast strong cash generation conditions to continue through 1H21, bringing forecast net cash to A$119mn in 1H21 and A$171mn in FY21. We forecast a recovery in dividend payout ratio to ~60% over FY21, translating to a forecast FY21 dividend of A$0.78 per share, implying a 6.7% [at the time] fully franked dividend before contemplating capital management.”
All in all, this appears to make the Super Retail share price one to watch in 2021.
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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 Super Retail Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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