Could Kogan.com Ltd (ASX: KGN) be classified as a really good ASX dividend share?
The most obvious answer is the dividend yield. Using the last two dividend announcements, Kogan has a fully franked dividend yield of 2.1%, or 3% including the franking credits.
In the February reporting season, Kogan’s board decided to increase the dividend by 113.3% to $0.16 per share. Considering Kogan generated $0.35 of adjusted profit / earnings per share (EPS), or $0.22 of actual EPS, that’s a pretty healthy dividend payout ratio. The payout ratio of statutory profit is around 73%.
Kogan.com is a very scalable business, so it doesn’t need to hold onto high levels of capital to continue to keep growing the business at a high rate and improving the offering.
Indeed, one big part of the business is called Kogan Marketplace where sellers can sell products on the Kogan website. The business is trying to continue to invest in this side of the business – ongoing sales growth here doesn’t result in a corresponding increase in inventory.
So the dividend payout ratio could slowly increase and not actually impact the overall growth of the business.
Kogan says that it’s continuing to deliver significant projects to grow its products and services offering, while investing heavily in its brands.
What about the future dividends?
I think Kogan has shown its dividend intentions since 2017 – it has grown every year since then. That’s another good factor for being a solid ASX dividend share.
In 2017 it was $0.077 per share. The FY21 interim dividend was more than double that at $0.16 per share.
Using the projections on CommSec, Kogan is expected to pay an annual fully franked dividend of 37.5 cents per share – which would be a 3.9% yield with franking credits included. By FY23, it could pay a dividend per share of 49.2 cents which translates to a forward projected yield of 5% including the franking credits.
I don’t know about you, but those yields seem attractive to me. Combine that with the strong levels of growth that Kogan.com is achieving and I think it could produce good shareholder returns seeing as it’s valued at 37 times the estimated earnings for the 2021 financial year.
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