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Dunelm offers investors special dividend, eyes more greater London stores

Yet again, Dunelm shareholders are on course to receive a special dividend
February 10, 2016

A 5 per cent improvement in like-for-like sales drove shares in homewares group Dunelm (DNLM) up more than 8 per cent in early trading. But we should add a caveat. The figures were helped by an extra eight days of the group's winter sale, compared with two days the year before. Adjusting for the calendar impact, the underlying growth rate settled at 2 per cent. That said, the business still remains highly cash generative, allowing bosses to pay another special dividend - this time worth 31.5p a share - alongside the scheduled dividend in March.

IC TIP: Hold at 888p

Chief executive John Browett has outlined eight new growth drivers for the business, though he admits these initiatives are unlikely to impact figures before the financial year-end. They include scouting for new store locations in greater London, a market Mr Browett feels is "under served" as far as affordable homewares are concerned. But the group will have to keep a close eye on costs in this respect. According to Mr Browett, sales must be sufficiently strong to justify paying new London rents to drive growth.

Analysts at Peel Hunt still expect adjusted pre-tax profits of £130m for the year to end-June, giving adjusted EPS of 50.1p. That compares with £123m and 47.3p for FY2015.

DUNELM (DNLM)
ORD PRICE:888pMARKET VALUE:£1.80bn
TOUCH:885-894p12-MONTH HIGH:1,023pLOW: 801p
DIVIDEND YIELD:2.5%*PE RATIO:18
NET ASSET VALUE:67pNET DEBT:22%

Half-year to 2 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201540668.226.55.5
201644875.529.46.0
% change+10+11+11+9

Ex-div: 3 Mar

Payment: 24 Mar

*Does not include special dividend worth 31.5p a share