I don't think SCT management see themselves as a 'no growth' company. But as investors I think it is reasonable to assess the company as a 'dividend payer only' to get some idea of value.
Year |
Dividends as Declared |
Gross Dividends |
Gross Dividend Total |
FY2018 |
6.0c + 4.0c |
8.33c + 5.56c |
5.56c |
FY2019 |
6.0c+4.0c |
8.33c + 5.56c |
13.89c |
FY2020 (1) |
4.0c (18.41% I) + 0c |
5.02c + 0c |
5.02c |
FY2021 |
0c + 2c (NI) |
0c + 2.00c |
2.00c |
FY2022 |
4c (NI)+ 4c (NI) |
4.00c + 4.00c |
8.00c |
FY2023 |
4c (NI)+ ?c |
4.00c + ?c |
4.00c |
Total |
|
|
38.5c |
Notes
1/ A sample calculation to work out the equivalent gross figure for the FY2020s partially imputed dividend, is as follows:
FY2020 Dividend P.I.: 4.0c (18.41% imputed, 18.41%/28%= 0.6575)
= 2.63c (FI) + 1.37c (NI)
= 2.63c/0.72 + 1.37c = 3.65c + 1.37c = 5.02c (gross dividend)
Discussion
Averaged over 5 years of dividend payments, the dividend works out at 38.5/5 = 7.70c (gross dividend).
I consider that under a more focussed industrial standard product model, an appropriate gross yield return on investment is 7.0%. This means that a 'fair value' for SCT shares, based on the 5 yearly historic dividend record, is:
7.70c / (0.07) = $1.10
Now, using my plus and minus 20% rule of thumb range to get a feel how the SCT share price might behave at the top and bottom of its business cycle.
Top of Business Cycle Valuation: $1.10 x 1.2 = $1.32
Bottom of Business Cycle Valuation: $1.10 x 0.8 = 88c
SCT shares were trading at $2.75 on Tuesday 15th November as I write this (more than double the upper end of my expected range). By this measure the shares are now ($2.75-$1.10=) $1.65, or 150% overvalued (from a business cycle projected dividend income perspective). Another way of interpreting the same information is to say that SCT shares currently contain a 150% 'growth premium' (because a capitalised dividend valuation assumes no growth).
This current gross annual dividend rate being modelled of 7.7cps cps, is very close to the current twelve month dividend rate of 8cps. So it may not be reasonable to expect increasing dividends going forwards.
It is clear the market is pricing SCT well above what we might expect from 'a dividend payer'. This means the market clearly believes the growth story. So capitalising the dividend is not a good sole tool to measure the worth of this company.