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Investors who have stakes in Graincorp Ltd (ASX: GNC) witnessed a relatively positive trajectory in 2023, but the year 2024 seems to be presenting a different narrative. Throughout the current year, Graincorp shares have demonstrated resilience, climbing from AU$7.20 to AU$8.15 per share, yielding a commendable return of 13.2%. This growth outpaces the S&P/ASX 200 Index (ASX:XJO), which only saw a marginal increase of 0.55% during the same period. Furthermore, Graincorp shares have surged by over 11% over the past twelve months.
Presently, at the prevailing share price, this agricultural stock within the ASX 200 commands a trailing dividend yield of 3.43%. While this yield appears respectable on the surface, it prompts an exploration of what dividend prospects Graincorp holds for the remainder of 2024.
Graincorp's dividend distribution history sheds light on its past performance. The company traditionally disburses biannual dividends in July and December. The most recent final dividend declared in December amounted to 14 cents per share, fully franked. Combined with the interim dividend of 14 cents per share distributed last July, investors enjoyed an annual total of 28 cents per share. This dividend consistency marks positive news for Graincorp stakeholders, as it matches the ordinary dividend income levels observed in 2022 and represents a notable increase from the 18 cents per share recorded in 2021. Factoring in the current share price, this annual dividend equates to a yield of 3.43%.
However, this reported yield overlooks a crucial aspect of Graincorp's dividend policy: the potential for special dividends. The company reserves the right to issue special dividends if deemed feasible based on surplus cash flow. In 2023, shareholders received special dividends of 10 cents per share alongside the interim dividend in July and 16 cents per share with the final dividend in December. Both special payments were fully franked, elevating Graincorp's actual annual payout to an enticing 54 cents per share and bolstering the trailing dividend yield to 6.63%.
Looking ahead to 2024, the dividend landscape for Graincorp remains uncertain. While the company's dividend declarations are contingent upon official announcements, early indications hint at a cautious outlook. Last month, Graincorp provided guidance for the full 2024 fiscal year, signaling a potential downtrend. Projections suggest a decline in underlying earnings before interest, tax, depreciation, and amortization (EBITDA) to a range of AU$270 million to AU$310 million, down from the AU$565 million reported in FY2023. Similarly, underlying net profits are anticipated to decrease to a range of AU$65 million to AU$95 million, compared to AU$250 million in FY2023.
With anticipated reductions in profitability and earnings, Graincorp may face limitations in its dividend payout capacity for 2024. Unless there are substantial shifts from the current guidance, investors might need to prepare for the possibility of a dividend cut, and potentially, the absence of special dividends in the upcoming year.
In summary, while Graincorp's recent performance has been favorable for investors, the outlook for dividends in 2024 appears uncertain amid projections of diminished financial performance. As the company navigates evolving market dynamics and operational challenges, stakeholders will keenly await official announcements regarding dividend policies and distributions for the remainder of the fiscal year.
