The ASX dividend stock Lindsay Australia Ltd (ASX: LAU) has seen its share price drop 34% since July 2023, as shown in the chart below.
This company plays an important part in the backbone of the Australian economy. Lindsay is an integrated transport, logistics and rural supply company and "a leading national service provider" to the agriculture, horticulture and food-related industries.
One of the most useful things about a share price decline is that it boosts the potential dividend yield from that stock. For example, if a dividend yield starts at 5% and the share price falls 10%, the yield becomes 5.5%.
The decline has been significant for Lindsay, so let's look at what's gone wrong in the last 13 months.
Short-term weakness
In May, Lindsay told investors in its FY24 trading update that it saw lower horticultural volumes in seasonal products caused by "significant and persistent wet weather". Conditions impacted all business units and products, particularly in North Queensland.
The company also pointed to multiple rail disruptions, including a major four-week east-west corridor outage that started in early March, with subsequent disruptions in April.
Disrupted freight flows and volumes impacted operational efficiency and utilisation.
After the Easter period, Lindsay expected a rebound in volumes typical of post-Easter trading. However, volumes remained subdued, affected by soft demand and adverse weather conditions.
Positive longer-term outlook for the ASX dividend stock
The company said the outlook was still positive for the ASX dividend stock's market segments.
According to Lindsay, favourable soil moisture profiles and water storage in key irrigation regions provided "positive conditions for the horticultural sector going forward."
The refrigerated logistics sector would "continue to be supported by increases in population and immigration growth, changing consumption habits and demand for efficient road and rail services".
The company forecasted commercial freight volumes to grow by approximately 6% in the second half of FY24 compared to the second half of FY23.
Despite the weaker conditions, the company has continued to invest in its operations, network, and fleet during the year, adding additional capacity to support future growth. It is also reviewing its operations across the business to deliver a transformation program and increase efficiencies.
The ASX dividend stock's balance sheet is also in good shape, with the net leverage forecast to be below its internal target of less than 1.5x.
What about the dividend yield?
In FY23, the company paid a dividend per share of 4.9 cents. The forecast on Commsec suggests the annual dividend per share could rise in each of the next few results.
The Commsec forecast implies a possible annual dividend per share of 5.1 cents in FY24. This would be a grossed-up dividend yield of 8.1%.
In FY25, the payout is forecast to grow to 5.9 cents per share, which translates into a grossed-up dividend yield of 9.4%.
By FY26, the company is predicted to pay an annual dividend per share of 7 cents. That translates into a possible grossed-up dividend yield of 11.1%.
The potential of a large, growing payout for the next few years looks very appealing to me.
