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.
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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.
