Your point is absolutely correct @Aviza2913- you want to buy equities that are likely to reinstate dividends because intelligent investors buy ahead of the demand (an example being when you buy shares before they are included in an index ie ASX300 due to the benefits of buying ahead of the expected passive investor demand). My personal view is that they will reinstate dividends in August 2025 noting that management has been clear that once dividends are restarted, they are permanent (or as they phrase It 'sustainable').
We know that once dividends are restarted there will be a massive new cohort of investors including self-funded retirees that will purchase SWM for its fully franked dividend yield. 4 cents per year of fully franked dividends which is equal to what was being paid out by SWM in 2017 would give a current yield of >26% at 15 cents per share! This starts to demonstrate just how absurdly cheap SWM is currently.
Oh and this 4 cents per share dividend would only be a dividend payout ratio of 40% of NPAT at mid cycle earnings! meaning the company could continue to invest into growing its digital BVOD business (or maybe making one of those value accretive investments that @optimistus loves so much!)
Right now SWM trades at less than 1.5x mid cycle earnings of ($155m NPAT) and once a dividend is reinstated this will turn SWM into a multi-bagger that in due course will rejoin the ASX300.
We now know that the market has priced in a 95% chance that interest rates get cut on the 18th February. This will drive the turnaround in the ad market and consequently will ensure that the August 2025 FY25 Full Year Results show that 'prevailing market conditions' will have turned positive and hence management will be able to follow through on their word to reinstate dividends.
Great article in the AFR about cyclical stocks being the biggest beneficiaries of the interest rate cuts in Australia this year. https://www.copyright link/wealth/investing/cyclical-stocks-poised-for-a-comeback-20250120-p5l5vd
SWM Price at posting:
16.5¢ Sentiment: Buy Disclosure: Held
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