McMillan Shakespeare share price revs 9% higher on bumper final dividend

The fleet management and salary packaging company is implementing a new capital allocation strategy.

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Key points

  • McMillan Shakespeare has reported its full-year FY22 results 
  • The company more than doubled its final dividend to 74 cents 
  • The company announced an off-market share buyback for up to 10% of its shares 

The McMillan Shakespeare Limited (ASX: MMS) share price is leaving the S&P/ASX 200 Index (ASX: XJO) in the dust today.

After opening 3% higher, the McMillan share price is soaring 9% at the time of writing to $13.95.

Investors are reacting positively to the fleet management and salary packaging company's FY22 results.

McMillan share price takes flight as dividend delights 

Here are some of the key points from McMillan Shakespeare's full-year results:

  • Normalised revenue came in at $594.3 million – up 9.2% compared to the prior corresponding period (pcp) of FY21
  • Statutory net profit after tax (NPAT) grew by 15.2% on the pcp to $70.3 million
  • The company declared a fully franked final dividend of 74 cents
  • McMillan will undertake an off-market share buyback for up to 10% of its shares

McMillan's final dividend was a standout, representing a whopping 154% increase on the pcp as the company revised its dividend payout policy.

Going forward, it will now return between 70% and 100% of underlying profit to shareholders in the form of dividends.

Today's final dividend of 74 cents represents a dividend payout ratio of 100% of underlying profit, up from 66% in the pcp.

Combined with its interim dividend earlier in the year, McMillan shares are currently trading on a trailing dividend yield of 7.7%.

What else happened in FY22?

During the year, McMillan's long-standing CEO Mike Salisbury retired after 14 years with the company. 

The year also saw McMillan restructure the company and divest its Davantage Warranty and UK CLM Fleet Management businesses. 

In an effort to further simplify the business, it will consider exit options for its UK businesses in FY23.

At the same time, it's considering potential acquisition opportunities in its plan and support services (PPS) division.

What did management say?

Commenting on the results, McMillan Shakespeare CEO Robert De Luca said:

While we have continued to operate in an environment impacted by new vehicle supply constraints, our ongoing customer focus has helped underpin business momentum benefiting FY22 and future periods.

Through FY23 we will continue to simplify our business, invest in digital and data analytics to enhance the customer experience, supporting business growth and future productivity benefits.

What's next?

Looking ahead, McMillan has begun FY23 with around $26 million in novated lease carryover.

While management didn't provide specific guidance, it did comment on the outlook.

The company expects that many of the market conditions experienced in FY22 will continue into FY23. In particular, global motor vehicle supply constraints.

McMillan also anticipates that novated lease yields and end-of-lease income yields will remain at current levels.

McMillan Shakespeare share price snapshot

Boosted by today's rise, the McMillan share price has comfortably outperformed the ASX 200 this year.

McMillan shares have jumped 15% since the beginning of 2022 and are up 11% over the last 12 months.

Motley Fool contributor Cathryn Goh 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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