Does a 7% dividend yield sound pretty good to you? How about one with full franking? That would help gross this 7% yield up to a whopping 10%. With savings accounts and term deposits offering (at best) yields of around 4% right now, I'm sure it sounds pretty good. So time to check out the ASX 200 share with this yield on the table today.
It is none other than JB Hi-Fi Ltd (ASX: JBH). Chances are you'd know JB. It's one of the most dominant ASX 200 retailers in the country, selling everything from vinyl records, games and movies to TVs, fridges, and washing machines.
So is this 7%-yielder really an ASX share to buy this December and hold for 10 years? Can we even expect a 7% yield going forward?
Let's dig in.
So yes, JB is offering a 7% fully franked dividend yield today. That figure comes from JB's last two dividend payments. Those consisted of the interim dividend from March, worth $1.63 a share. And the September final dividend of $1.53 per share. The 2022 total of $3.16 in dividends per share is an all-time record for JB Hi-Fi.
But JB's current 7% yield is also made possible by this share's anaemic performance over 2022 thus far. Year to date, JB shares have lost 7.35% of their value, as you can see below:
That's a fall worth around twice that of the broader S&P/ASX 200 Index (ASX: XJO). As any good dividend investor knows, a falling share price boosts a company's trailing dividend yield.
So let's dig a little deeper into this dividend. Over FY2022, JB Hi-Fi made $4.795 in earnings per share (EPS) over this financial year. The company paid out $2.70 of those earnings per share as dividends per share.
That gives JB a dividend payout ratio of 56.3%. That isn't high at ASX standards (the major ASX banks regularly break 80%). But it isn't particularly low either.
That means that for this dividend to be sustainable going forward, JB needs to keep its pedals to the metal.
All signs show that this is likely, at least in the next year or two.
Is ASX 200 retailer JB a long-term winner?
For FY2022, JB reported that its sales were up 3.5% to $9.2 billion. It also reported a 7.7% rise in net profit after tax (NPAT) to $545 million. The EPS of $4.795 was an 8.8% rise over FY21's $4.41.
Back in FY18, JB only had sales worth $6.9 billion, NPAT of $233 million, and EPS of $2.03. So this is clearly a company that knows how to grow.
In October this year, JB gave investors a peek into its numbers for FY2023 so far. And they were impressive.
Between 1 July and 20 September 2022, the company reported that sales in its Australian stores were 14.6% higher than for the same quarter last year. For its New Zealand stores, it was 27.7% and for The Good Guys, 12.3%.
Now, there's no guarantee JB will continue to grow at the same rate as it has done over the next decade. This is a company that will certainly feel the effects of a recession — if the next decade does bring one. But it certainly has a lot of runs on the board.
As such, I would feel very comfortable buying this ASX 200 retail share this December and holding it in my portfolio over the long term. That dividend would be fine company too.
