Humm (ASX:HUM) share price falls despite revealing recommencement of dividends

The buy now, pay later company’s board has approved dividends for FY22.

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a woman looks at her phone while making a transaction at the counter of a store where racks of clothing can be seen in the background.

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The Humm Group Ltd (ASX: HUM) share price opened lower on Wednesday after the company released its investor strategy day presentation.

At the time of writing, the Humm share price is 0.54% lower at 92 cents.

Humm’s big reveal

Humm revealed two major announcements this morning. The first was a return to dividends commencing in the first half of FY22.

Humm is one of the only profitable ASX-listed buy now pay later companies. It delivered a cash net profit after tax (NPAT) of $68.4 million in FY21.

Its profitability makes it look relatively cheap from a price-to-earnings perspective, trading at just 7 times FY21 NPAT.

Humm said that its board approved the recommencement of dividends with a payout ratio of 30% to 40%.

In addition, Humm highlighted that “following significant market interest, hummgroup is currently exploring a possible divestment of the New Zealand commercial business”.

Humm noted that its current New Zealand commercial portfolio consists primarily of laptops, telecommunications, and office equipment with an average transaction value of $9,000.

The divestment is subject to any proposed sale meeting management’s valuation expectations.

Humm first quarter results

Humm released its first-quarter results on Friday last week, recapping another strong period of sustained growth.

Some key highlights include:

  • Group 1Q22 total transaction volume (TTV) rose 39.6% against the prior corresponding period (pcp) to $763.3 million
  • BNPL TTV up 44.5% to $308.8 million
  • Total hummgroup customers rose 6.1% to 2.7 million including a 16% increase in BNPL customers

The company was pleased with the performance of its BNPL segment, consisting of humm, bundll and hummpro. The 44.5% increase in TTV was driven by strong volume growth in its humm ‘little things’ campaign in Australia.

Despite an encouraging performance, the Humm share price closed Friday’s session just 0.55% higher to 91 cents.

Humm share price snapshot

The Humm share price is down 16% year-to-date, broadly in line with the struggling BNPL sector.

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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 Humm 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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