What kind of dividends can you expect from Graincorp shares in 2024?

Graincorp investors might not be as lucky this year as they were in 2023…

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Investors who own Graincorp Ltd (ASX: GNC) shares have had a fairly decent year so far in 2024. The Graincorp share price has risen from $7.20 to $8.15 a share over the year to date, giving investors a return of just over 13.2%.

Not bad, considering the S&P/ASX 200 Index (ASX: XJO) has risen by just 0.55% over the same period.

Graincorp shares are also up just over 11% over the past 12 months.

At today's share price, this ASX 200 agricultural stock is trading on a trailing dividend yield of 3.43%. That's not a bad yield, objectively speaking. But today, let's discuss what kind of dividends Graincorp might pay out in 2024.

What kind of dividends do Graincorp shares pay?

So today's trailing yield of 3.43% comes from Graincorp's last two dividend payments. This company forks out its biannual dividends in July and December. The last final dividend that was doled out last December came to 14 cents per share, fully franked.

Together with the interim dividend of 14 cents per share investors received last July (also fully franked), we get an annual total of 28 cents per share.

This is good news for Graincorp investors. That's the same level of ordinary dividend income shareholders received over 2022, and an increase over the 18 cents per share from 2021.

Plugged into today's share price, this annual total gives us that dividend yield of 3.434%.

However, that yield leaves out something very important. Graincorp's dividend policy allows the company to fork out special dividends if the company has "surplus cash flow".

Over 2023, this resulted in a special dividend of 10 cents per share alongside the July interim dividend, and a special dividend of 16 cents per share that was coupled with the final dividend. Both of these special payments came fully franked too.

That takes Graincorp's real annual payout to a far more compelling 54 cents per share. This gives the company a beefed-up trailing dividend yield of 6.63%.

What about 2024?

That's all well and good for investors who have held Graincorp shares over the past year. But what will income investors see for the company in 2024?

Well, it's hard to know of course. A dividend is only confirmed when the company announces it. Before then, all options are theoretically on the table (remember, no company is under any obligations whatsoever when it comes to its dividends).

Saying that, early signs are not too positive for Graincorp shareholders. Last month, Graincorp issued some guidance for the full 2024 financial year. And it certainly tempered investor expectations.

The company revealed that it expects to report underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of between $270 million and $310 million for the full year. That's down from the $565 million reported in FY2023.

The company is also anticipating underlying net profits to come in at between $65 million and $95 million, down from $250 million in FY2023.

If Graincorp is making less profits and earnings, it obviously won't have as much cash to pay out in dividends and special dividends. So unless anything changes from this guidance, it might be prudent for investors to pencil in a dividend cut (and perhaps even no special dividends) in 2024.

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. 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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