Dividend payouts have not compensated well enough for shareholders of the past year
Stock: DIXONS CARPHONE ORD GBP0.001(OTCMKTS:DSITF)
Dixons Carphone PLC, a $2.9 billion multinational electrical and telecommunications retailer and services company headquartered in London, United Kingdom, recently traded at a good 30% discount to its book value while having had an attractive 6% dividend yield at a 39% payout ratio.
In its recent 12 months of operations that ended in April, the three-year-old company reported 8.7% revenue growth to £10.6 billion (vs. 3-year average 441%) and profit growth of 83.2% to £295 million (vs. 3-year average 183.2%).
All of Dixons’ segments demonstrated revenue in its recent year. Its UK & Ireland (62% of total unadjusted sales) delivered 2.6% revenue growth, while its business in the Nordics, Southern Europe, and Connected World Services experienced 20% to 40% year over year revenue growth.
Connected World Services, which is 2% of total unadjusted sales, registered an outstanding 40% revenue growth in the past 12 months and an EBIT margin of 9.9% (most profitable) compared to 7.2% a year earlier period.
As of April, Dixon had £147 million in cash and £480 million in debt with debt-equity ratio of 0.16 times (vs. 0.17 times a year earlier). Overall debt declined by £20 million while equity rose £195 million to £3.06 billion.
In the past couple of years, Dixon allocated £463 million in capital expenditures, generated £295 million in free cash flow, reduced its debt by £51 million, and provided £226 million in dividends and share repurchases at an average payout ratio of 79%.
Analysts have an overweight recommendation with a target price of £250.24 vs. £193.40 at the time of writing. Asking 25% margin from Dixon’s book value indicated a per share figure of £224.24 a share.
Meanwhile, Dixons’ shares that trade in the over-the-counter market, would indicate a per share figure of $3 vs. $2.48 at the time of writing.
For sure, this would indicate that Dixon is at good value right now, but sifting through recent events regarding the company. Several shareholders are already wary that the company had cut its profit outlook this fiscal year along with its share price decline in recent years.
In summary, Dixons is a hold at this time.
About Dixons Carphone PLC
According to filings, Dixons’ core retail focus is the sale of consumer electricals and mobile phone products and connectivity.
The company also has a significant services infrastructure focused on maintenance, support, repairs, delivery and installation of hardware and services. In addition, Dixons has developed a business-to-business operation via its Connected World Services division which leverages the specialist skills, operating processes and technology of the business to provide services to third parties.
Disclosure: I do not have shares in any of the companies mentioned.