Why the Tabcorp (ASX:TAH) dividend was boosted by 32%

The strong performance of Tabcorp’s business will see a combined FY21 dividend of 14.5 cents.

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Income investors can look forward to a solid Tabcorp Holdings Ltd (ASX: TAH) dividend after the company released its FY21 results on Wednesday.

How did Tabcorp perform in FY21?

The gambling entertainment business delivered an 8.8% increase in revenues to $5,686 million. This solid top-line result saw earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items lift 11.3% to $1,107 million while net profit after tax (NPAT) before significant items surged 47.2% to $399 million.

The Tabcorp dividend came in at a solid 14.5 cents per share, making up a final dividend of 7.0 cents and interim dividend of 7.5 cents.

The Tabcorp business faced significant tailwinds last year, incurring a $1,090 million goodwill impairment as a result of reduced expectations for future growth and contract extensions due to ongoing COVID-19 impacts.

This would explain why year-on-year statutory NPAT surged from an $870 million loss a year ago to $269 million in FY21.

Tabcorp CEO David Attenborough highlighted the company’s divisional performance, saying:

The Lotteries & Keno business produced another record profit result driven by strategic game and portfolio development and digital growth.

Our Wagering & Media business delivered improved underlying performance and growth. Recent investments in digital and personalisation capability mean TAB customers now enjoy a more compelling wagering proposition.

Our Gaming Services business was most impacted by the trading restrictions on hotels and clubs, particularly in Victoria. The business made good progress in delivering its plan to simplify and streamline its operations during the year and this remains a key focus moving forward.

Tabcorp dividend jumps 32%

The board announced a fully franked final dividend of 7.0 cents per share, representing a payout ratio of 80% of NPAT before significant items.

This represents a 31.8% increase compared FY20 dividends of 11 cents per share.

At a closing price of $4.81 on Wednesday, Tabcorp FY21 dividends would yield 3.01%.

Tabcorp dividend key dates

The Tabcorp share price will go ex-dividend on Wednesday, 25 August and be paid out on Friday, 17 September.

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BlueBet Holdings Ltd. 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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