James Halstead polishes its reputation with yet another dividend increase

Russ Mould
26 September 2018

“When it comes to consistent increases in shareholder pay-outs few can match AIM-quoted flooring expert James Halstead,” says Russ Mould, AJ Bell Investment Director. “Today’s 4% increase in its total dividend for fiscal 2018 to 13.5p a share adds to a streak of consecutive increases that stretches back to the late 1970s.”

Source: Company accounts. Financial year to June

Adjusting for stock splits in 2006, 2011 and 2012, James Halstead’s dividend has grown from 0.016p a share in 1977 to 13.5p for the year ending June 2018.

The shares have struggled for traction over the last 12 months, thanks to raw material cost pressures (themselves the result of the weaker pound), an abandoned takeover of a rival firm and full-year profits which came in flat at £46.7 million, a fraction below the market consensus forecast of £47.6 million.

But James Halstead has been able to push through price increases to compensate for the cost pressures, thanks to its strong market position, reputation and track record of innovation.

Add that to £50.7 million net cash pile and the AIM-quoted company could well add to its stunning long-term share price performance record.

Since 1977 the shares have risen from 0.29p to 429p for a 149,931% capital gain, which massively outpaces the 2,620% advance in the FTSE All-Share over the same period.

If 41 years is too long for many of us to think about (even though it is the appropriate time horizon for investing for your pension), the numbers over the last 20 years are no less stunning.

Since 1998, James Halstead’s dividend has grown from 1.28p to 13.5p and its shares have soared from 31.4p to 429p. 

That 1,268% gain beats the 71% advance in the FTSE All-Share over the same period hands down.

Even if the past is no guarantee for the future, and purists would argue that James Halstead’s earnings cover for the dividend in the year to June 2018 is lower than ideal at 1.31 times, this shows two things:

1)    How picking stocks with strong competitive positions, good management, a healthy balance sheet and consistently robust returns on capital can generate excellent portfolio returns for very patient investors who are prepared to take a very long-term view. The stock market can be a fine get-rich-slow mechanism when it works well and when it is used properly (and not treated like a fruit machine and source of potential near-term jackpots)

2)    The importance of dividend growth. The 13.5p-a-share dividend of 2018 compares to James Halstead’s 1998 share price of 31.4p – the chances of Halstead’s shares staying unchanged over that period on what would now be a 43% dividend yield backed by a net cash balance sheet would be pretty slim. Share prices grow into and are pulled along by rising dividends.

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