Monday 1st December 2014
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Hellaby Holdings, the diversified investment firm, has lifted its dividend payout policy after recording strong cash flow and being told by investors that they want more yield.
The Auckland-based company has lifted its dividend policy to 75 percent of net profit after tax from a previous rate of 50 percent of profit, it said in a statement. The company reviewed its capital management policies due to an underperforming share price relative to earnings growth, and after deciding its balance sheet was strong enough to cope with making bigger dividend payments. The review considered free cash flow generation and feedback from shareholders and advisers that investors are increasingly searching for yield as well as growth, the company said.
"Hellaby's share price has remained largely unchanged over the past two years despite delivering a 44 percent increase in normalised NPAT and a 15 percent increase in dividends per share in the financial year to June 2014," managing director John Williamson said. "Our directors expect that the combination of strong earnings performance and an increased dividend pay-out should progressively lead to a re-rating of Hellaby's share price."
Shares of Hellaby rose 0.7 percent to $3.08, and have declined 5.6 percent this year. The stock is rated an average 'buy' based on four analyst recommendations compiled by Reuters, with a median target price of $3.45.
Chairman Steve Smith said the revised policy reflects the firm's "confidence in future cash flows" while keeping enough flexibility to support growth.
"With a very strong balance sheet to fund acquisitions, we believe it is now appropriate for shareholders to receive a larger proportion of our net profits each year," Smith said.
The policy is still subject to business performance, market conditions and capital requirements for growth, and will apply to the interim dividend to be announced with the first-half result in February.
The board also decided to suspend its dividend reinvestment plan, and is considering the merits of a share buyback, Hellaby said.
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