What Investors Should Know About Dairy Farm International Holdings Ltd’s Growth, Dividend, and Valuation

Over the past five years, the stock price of Dairy Farm International Holdings Ltd (SGX: D01) has fallen by 25%. But in the last 12 months, Dairy Farm’s stock price has actually been staging a revival of sorts by climbing nearly 18%.

In here, I want to look at three aspects of the company’s business that may interest investors, namely, its growth, dividend, and valuation.

1. Growth

The table below shows how Dairy Farm has performed in the last five years in terms of its revenue and profit growth:

Source: S&P Global Market Intelligence

We can see that the company’s revenue has steadily inched up over the years. The top-line growth has also been more stable than net profit growth. In 2012 and 2015, Dairy Farm saw its net profit fall by 7.8% and 16.6%, respectively.

2. Dividend

At its current share price of US$7.09, Dairy Farm is trading at a dividend yield of 2.8% thanks to its trailing dividend of US$0.20 per share. This is lower than the SPDR STI ETF’s (SGX: ES3) yield of 3.1%. The SPDR STI ETF is an exchange-traded fund that tracks Singapore’s market barometer, the Straits Times Index  (SGX: ^STI).

To assess the sustainability of the company’s dividend, we can look at two financial ratios: the debt-to-shareholders’ equity ratio and the profit pay-out ratio. Do bear in mind that there are many other things to look at beyond the two ratios.

The debt-to-shareholders’ equity ratio is a gauge for the level of financial risk a company is taking on. Meanwhile, the profit pay-out ratio is the percentage of a company’s profit that is paid out as a dividend. Generally speaking, the lower the two ratios are, the better it could be.

Dairy Farm’ latest debt-to-shareholders’ equity ratio is 62% and its pay-out ratio is 63%.

3. Valuation

Dairy Farm has a price-to-earnings (PE) ratio of 24 right now. One important thing to note is that the ratio is near a five-year low, as shown in the chart below:

Source: S&P Global Market Intelligence

But, another thing worth keeping in mind is that Dairy Farm’s PE ratio is also twice as high as the PE ratio of 12 that the SPDR STI ETF.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Dairy Farm International Holdings. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.