Trading on a fully franked yield of 5.7 per cent, JB Hi-Fi (ASX:JBH) shares are looking more and more like a dividend stock

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The JB Hi-Fi Limited (ASX:JBH) share price has gone into reverse on Monday, closing 9 cents or 0.4 per cent down to $23.38.

The leading electrical and home appliance retailer had earlier today reported earnings per share for the year ended 30th June 2018 increased by 9.2 per cent to 203.1 cents.

JB Hi-Fi increased its full year dividend by almost 12 per cent to $1.32 per share.

From a pure valuation perspective, JB Hi-Fi shares look attractively priced, trading on a P/E ratio of 11.5 times and a fully franked dividend yield of 5.7 per cent.

The share market initially marked the JB Hi-Fi share price higher, likely focusing on slightly better than expected results, and that July’s sales were reasonable.

Slowing growth

Looking forward, JB Hi-Fi expects future growth to moderate, saying it is guiding for total group sales to increase by just 2.9 per cent in FY19.

That comes at the same time as JB Hi-Fi continues to lower its selling prices to reinforce its market leadership, something that could negatively impact on the company’s profit margins.

JB Hi-Fi shares are some of the most heaving shorted on the ASX, with the bears continuing to believe that over the long term there would be a negative impact upon the company from Amazon.

Here at The Capital Club we had previously included JB Hi-Fi as one the six best dividend stocks on the ASX for 2018 and beyond.

It has only been two months since that list was compiled, and in that time the JB Hi-Fi share price is flat.

JB Hi-Fi now purely a dividend share

More than ever, given its sharply slowing revenue growth, JB Hi-Fi is looking more like a pure dividend share.

Income investors will be attracted to its 5.7 per cent full franked dividend yield, which grosses up to 8.1 per cent when franking credits are taken into consideration.

JB Hi-Fi shares look to have limited upside potential, with the dividend yield and modest valuation giving some downside protection.

That said, this is a tough economic environment, and another profit warning can’t be ruled out of the equation. 

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Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au