Kogan (ASX:KGN) dividend scrapped, share price plummets

Why are Kogan shares falling today?

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The S&P/ASX 200 Index (ASX: XJO) is having another smooth rise today so far, up 0.31% to 7,513 points at the time of writing. But one ASX 200 share is faring far worse today. That would be Kogan.com Ltd (ASX: KGN). The e-commerce company reported its FY21 full-year earnings report this morning before the market open. And investors are not taking too kindly to what Kogan had to show for itself.

The Kogan share price is currently hovering at $11.38 a share, down a nasty 13.29% today so far. That’s a pretty definitive ‘don’t like it’ from investors, it seems.

So as we covered this morning, Kogan did report a 56.8% increase in revenues to $1,179 million. It also reported a 46.9% jump in active customers to just over 3.2 million, and a 61% increase in gross profit to $203.7 million.

However, as my Fool colleague James reported this morning, “Despite delivering a 56.8% increase in revenue, inventory management issues ultimately led to the company reporting an 87% reduction in net profit after tax to just $3.5 million”.

This was driven by a 123% rise in variable costs to $44.9 million.

No dividends for Kogan shares

But perhaps the most startling piece of news from Kogan this morning was the announcement that the company will not be paying a dividend for the period.

Here’s what management said on the matter in the earnings report this morning:

Kogan.com has a strong balance sheet, and attractive short-term and long-term growth opportunities. To support the Company with its growth plans, the Board has decided to conserve cash for business investment and growth purposes and has paused dividends – having not declared a FY21 final Dividend.

This might come as a surprise for even long-term investors. Kogan has paid out two dividends every year since 2017 – including over 2020. It has also been steadily ratcheting up these payments.

The past two dividend payments the company doled out were an interim dividend of 16 cents per share that was paid out back in May. And a final dividend of 13.5 cents per share from October last year. In contrast, the company’s first dividends back in 2017 came in at 3.9 and 3.8 cents per share respectively

Those two payments are enough to give Kogan shares a trailing dividend yield of 2.59% on current pricing.

Given the savagery of investors’ reaction to Kogan’s earnings today, it’s possible that many investors are reacting to this halt of Kogan’s dividends. As such, this might be a primary catalyst behind today’s steep share price drop for the company.

At the current Kogan share price, the company has a market capitalisation of $1.39 billion. It also has a price-to-earnings (P/E) ratio of 27.95.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com 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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