Ann: Annual Report to shareholders, page-3

The Annual Report makes for great and reassuring reading.

On the subject of dividends, Steve Boland noted back in April 2023 that when the company listed, it had a policy of returning 30% to 60% of free cash (NPAT) as dividends to shareholders. At that stage, dividends amounted to 25% of free cash. He also mentioned at the time that from FY24 dividends would be fully franked.

Well, the company has delivered on both fronts, with the FY24 Annual Report showing that dividends to shareholders are indeed fully franked, and that the dividend pay out ratio has reached 47.7% (well inside the policy setting of dividend payments of between 30% to 60% of free cash).

So the question for the future will be whether the dividend pay out ratio will continue to grow towards 60% of free cash. My feeling is that it probably will, although with NPAT projected to keep growing, there may be a temptation for the Board to put the future dividend pay out ratio into neutral at around 50% on the bases that: 1) even with a static dividend pay out ratio in future, growth in NPAT by itself will ensure increased gross dividends to shareholders; and, 2) funding acquisitions for further growth may be considered to justify holding the future dividend pay out ratio at a static level (around 50%) into the medium term.

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