One Material Stock with 50% franked dividend – BLD!

Boral Limited

BLD Details

Expecting Property Earnings to be at the Higher End of guidance for Full Year: Boral Limited (ASX: BLD) has recently signed a deal with Mirvac to include an additional 278 hectares of land for Boral's Donnybrook property. Under this agreement, Mirvac will facilitate the urban developments of the 465-hectare site. Further, Boral acquired the Victorian site over 15 years ago as a potential hard rock quarry but rezoning of the area prevented the company from developing the quarry. Management expects that the Donnybrook development will be a key earnings contributor for Boral over the next 20 years wherein Donnybrook transaction will contribute $9 Mn of EBITDA to Boral in FY18, and approximately $9-$14 million per annum of EBITDA through to FY2021, and again between FY2025 and FY2027. Further significant earnings are expected from FY2028 to FY2037 as the land is progressively developed. Based on above development, the group now expects property earnings to be at the high end of its $55-65 million guidance for the 2018 financial year.
 

Earnings and Dividend per share (Source: Company Reports)
 
On the other hand, the company has updated its financial year guidance for both North America and Australia wherein Boral Australia now expects to deliver improved earnings (on both EBITDA and EBIT) growth of 10-20% for the 2018 financial year as compared to prior corresponding period. Boral North America is expected to deliver an earnings lift in the second half of around 10-25% compared to the first half-year results, on both an EBITDA and EBIT basis. Based on the robust performance in 1HFY18, the Board of Directors declared 50% franked interim dividend of 12.5 cents per share which was paid on March 09, 2018, representing a dividend payout ratio of 72.2% of net earnings after tax and dividend rise of 4.2% as compared to previous corresponding period. Looking at historical dividend performance, the company is expected to maintain its dividend payout ratio in the range of 50-70% of earnings before significant items in future while this might be subject to the Company’s financial performance. Meanwhile, BLD stock has fallen 19.25 per cent in the last three months as on May 25, 2018 and trading close to 52-week lower level. Hence, we give a “Buy” recommendation on the stock at the current price of $ 6.29, considering the opportunity to enter into the stock based on expected full financial year performance.
 

BLD Daily Chart (Source: Thomson Reuters)

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