If you are looking for a combination of big gains and an above-average dividend yield, then Harvey Norman Holdings Limited (ASX: HVN) shares could be the answer.
That's the view of analysts at Bell Potter, which believe that the ASX 200 stock offers both.
What is Bell Potter saying about the ASX 200 stock?
Bell Potter notes that Harvey Norman has just released a trading update and revealed improvements across key markets. It said:
Harvey Norman (HVN) provided a 4-month retail trading update at the AGM with total aggregate sales +1.7% on pcp for 1-Jul to 31-Oct as all four key markets improved their performance from the last update.
In response, Bell Potter has revised its estimates slightly. It adds:
We factor in the YTD (first 4 months) aggregate headline sales growth rate of +1.7% into our 1H25 estimates and account for an incremental recovery into the seasonally larger period (Nov & Dec) ahead which would be key to 1H sales/profitability. Our revenue assumptions see minor downward revisions with 2.0% growth in aggregate headline sales for 1H25e (prev. 2.4%).
Nevertheless, it remains very positive on the ASX 200 stock. Particularly given its exposure to the artificial intelligence (AI) megatrend. It believes this could drive a major upgrade/replacement cycle of devices purchased during the COVID-19 pandemic.
Time to buy
In light of the above, the broker has reaffirmed its buy rating and $5.80 price target on its shares. Based on its current share price of $4.76, this implies potential upside of 22% for investors over the next 12 months.
In addition, it is forecasting a fully franked dividend of 25.9 cents per share in FY 2025. This equates to an attractive 5.4% dividend yield at current levels. Combined, that's a total potential 12-month return of over 27% for this ASX 200 stock.
Commenting on its buy recommendation, Bell Potter said:
Our PT remains unchanged at $5.80 given minor earnings changes. Our PT is based on a sum-of-the-parts valuation with a DCF methodology (WACC ~9%, TGR ~3%) for retail operations (ex-Property) and the property bank on a fair value basis (as last reported) assuming a largely similar capitalisation rate over FY25e.
Similar to JBH, we see a sizable upside from the AI driven upgrade cycle/replacement cycle of devices purchased during COVID-peak to Consumer Electronics sales at HVN ahead. We view HVN as supported by exclusive access from brands/chip manufacturers given large format stores globally which are attractive to global technology brands/suppliers when launching new products. We see trading in the Black Friday weekend from today and into Christmas as a near-term catalyst with early signs to-date appearing supportive.
