The recent interest rate drop by U.S. Fed Reserve, though not exactly followed by RBA in Australia, has sent passive income investors scurrying for consistent dividend paying
stocks. As with falling interest rates, cash investments like term deposits may not remain that lucrative. Two ASX dividend stocks with consistent dividend yield that could be considered are
Smartgroup Corporation Limited (ASX: SIQ)
Smartgroup Corporation Limited has reported impressive half-year results for the period ending 30 June 2024. The company achieved revenue of $148.5 million, representing a 27% increase compared to the previous corresponding period, primarily driven by higher novated leasing volumes and improved vehicle supply.
Operating EBITDA rose to $56.2 million, marking a 20% growth year-on-year. The EBITDA margin, excluding implementation costs from the South Australia government contract, improved to 40%, reflecting Smart group’s focus on enhancing customer experience and operational efficiency.
The company has successfully implemented its strategic priorities, establishing a new operating model and executive team while also divesting two non-core businesses. This streamlining aims to sharpen its focus on salary packaging, novated leasing, and fleet services. Following the acquisition of the South Australia Government contract, Smartgroup’s services are now accessible to over 110,000 government employees, which further solidifies its market position. Notably, NPATA increased to $34.1 million, an increase of 16% on the prior period, and the strong cash flow conversion of 108% of NPATA reflects the company's robust financial health.
Smartgroup has established a strong track record characterized by stable revenues and consistent profit margins. The company has demonstrated impressive return on invested capital (ROIC), reflecting efficient use of capital to generate earnings. Additionally, Smartgroup has shown solid earnings retention, allowing it to reinvest in growth while maintaining shareholder value. This robust financial performance is complemented by a strong dividend coverage ratio, ensuring that dividends are sustainably funded. Together, these factors highlight Smartgroup's ability to deliver reliable financial results and provide attractive returns to investors over time.
Since its IPO in mid-2014, Smartgroup has returned approximately $510 million in fully franked dividends to shareholders, reflecting a solid commitment to shareholder returns. The company's dividend policy targets 60-70% of NPATA, demonstrating a disciplined approach to distributing profits. In FY24, Smartgroup declared a fully franked interim dividend of 17.5 cents per share, reinforcing its status as a consistent dividend payer.
Looking ahead, forecasted dividend cash flows are projected to grow from $0.21 in March 2025 to $0.26 in March 2026, and then to $0.27 in March 2027, with further increases expected by March 2028. This trend highlights Smartgroup's strong dividend growth history and its dedication to providing value to its shareholders.
MotorCycle Holdings Limited (ASX: MTO)
Despite the new motorcycle retail industry experiencing a 3% decline, reflecting a broader market downturn, MotorCycle Holdings Limited managed to outperform this trend with a notable 5.4% increase in its sales. While the industry's total units peaked at 67,690 in 2022 before dropping to 46,742 in FY2024, MTO demonstrated resilience and growth, with its unit sales rising from 45,085 in FY2023 to 48,929 in FY2024, highlighting MTO's ability to capture market share and expand its presence despite the overall industry decline. The steady increase in MTO’s sales from 5,153 units in the first half of 2019 to 7,652 units in the second half of 2024 further reflects its strong performance and strategic success in a challenging market environment.
The company is one of the high yield dividend stocks having declared a fully franked final dividend of 7 cents per share, bringing the total full-year dividend for FY2024 to 10 cents per share.
Motorcycle Holdings Ltd is strategically navigating challenging market conditions by focusing on disciplined execution and proactive cost management to address inflationary pressures. The Group remains committed to expanding its market presence in Australia and New Zealand, enhancing its product range, and capitalizing on early industry recovery signals observed in mid-2024. Forecasts are based on assumptions of moderate growth in retail unit sales, stable revenue increases in fixed operations, and operational uplifts in Motorcycle Accessories Wholesaling and Wholesaling. Synergies from shared warehousing in New Zealand and planned expense reductions are expected to stabilize costs and improve EBITDA margins. Interest rates and cost of living pressures are anticipated to impact trading, but stronger results from Cassons and potential new brand introductions through Mojo and Cassons are poised to drive business improvement and cost control. Successful integration efforts and exploration of new opportunities are also key components of the Group's strategy for FY25 and beyond.
Source: Company’s Report
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