JB Hi-Fi Stock: Is the 7% Dividend Yield a Buy Signal?

2 min read | November 17, 2023 10:18 PM AEDT | By Team Kalkine Media

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JB Hi-Fi Stock: Is the 7% Dividend Yield a Buy Signal? — Image source: TZIDO SUN, Shutterstock

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Owners of JB Hi-Fi Limited (ASX:JBH) stock have enjoyed robust dividends for an extended period, with the potential for a grossed-up dividend yield of 7% over the next 12 months. The question arises: Is this the opportune moment to invest in this ASX consumer stock?

JB Hi-Fi, with operations spanning Australia and New Zealand, including The Good Guys, has encountered notable volatility since the start of 2020, and its share price has dipped more than 10% since March 2022.

In its recent sales update for the first quarter of FY24, ASX JBH reported results in line with expectations, navigating the challenges of cycling the elevated period from the previous year. During the three months ending September 2023, JB Hi-Fi Australia sales dipped by 0.1%, JB Hi-Fi New Zealand sales rose by 1%, and The Good Guys sales decreased by 12.2%. The company highlighted ongoing variability in category performance.

Despite potential shifts in consumer behavior post-COVID-19, JB Hi-Fi remains a defensive stock, given the essential nature of products such as phones, laptops, and appliances in today's society. The company's retail prowess is evident, and its position as a beneficiary of Australia's growing population adds to its resilience.

The key consideration is the expected drop in earnings for FY24. While the JB Hi-Fi stock price has not significantly declined, investors appear optimistic about its profit outlook. UBS notes that the company is eyeing growth in New Zealand, and its overall growth may be tied to factors like population growth, market share performance, and category dynamics. Despite a 'neutral' stance from UBS, the ASX retail share stands out with a low price/earnings (P/E) ratio and an attractive dividend yield.

Valued at 14 times FY24's estimated earnings, JB Hi-Fi stock presents a grossed-up dividend yield of around 7% based on UBS estimates.

In conclusion, while opinions may vary, JB Hi-Fi's reputation as a strong retailer, combined with its current valuation metrics, positions it as an intriguing investment option for those considering the ASX retail sector.

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