Investors that are looking for the perfect combination of big gains and generous dividend yields might want to consider Inghams Group Ltd (ASX: ING) shares.
That's the view of analysts at Bell Potter, which believe the ASX 200 share could deliver very strong returns for investors.
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What is the broker saying about this ASX 200 share?
Bell Potter notes that the poultry producer's share price has remained depressed since its half-year results. This is despite the continued downdraft in both domestic wheat and imported soybean pricing.
The broker appears to believe that the market isn't fully appreciating what this could mean for its costs and profits. Commenting on feed costs, the broker said:
Since reporting Australian ASW benchmark wheat and soybean meal prices have fallen ~5%. Given ING's forward purchasing arrangements, we see CY24TD feed cost indicators (drives FY25e COGS) down -13% relative implied FY24e levels, with our spot feed index -19% below the implied FY24e average. While our forecasts already assume a downdraft in FY25e feed COGS, the current implication if sustained is a more material downdraft than allowed for in our forecasts.
In addition, Bell Potter believes that poultry prices have remain reasonable. It adds:
CPI indicators for Feb'24 in NZ demonstrated MOM gains of +1% and while down -1% YOY looks reasonable. CPI indicators for Australia in Jan'24 continued to demonstrate upward inflation, up +1% MOM and +3% YOY. Inflation data has so far supported outlook comments from ING at the 1H24 result.
Big gains and yields expected
In light of the above, the broker has reiterated its buy rating and $4.35 price target on its shares.
Based on where the ASX 200 share currently trades, this implies potential upside of approximately 24% for investors over the next 12 months.
But it gets better. Bell Potter is forecasting a 23 cents per share fully franked dividend in FY 2024 and then a fully franked 24 cents per share dividend in FY 2025. This equates to yields of 6.5% and 6.8%, respectively.
All in all, if Bell Potter is on the money with its recommendation, investors could generate a total return of approximately 30% over the next 12 months.
To put this into context, a $10,000 investment would generate a return of $3,000 for investors.
The broker concludes:
Trading at the lower bound of its historical EV/EBITDAL trading range and well below its historical average (of 8.3x EV/EBITDAL) we retain our Buy rating.
