JSE dividends (all share index dividends per share) have increased significantly faster than earnings over recent years. The payout ratio (dividends-earnings), which averaged about 40% between 1995 and 2016, has increased to about 60% of earnings. If we leave Naspers — now about 18% of the all share index — out of the calculation, the payout ratio is now close to 70% of reported headline earnings. This ratio is unusually high against international and emerging market comparisons. Since 2012 JSE dividends per share in rand have doubled while reported earnings are only 20% higher. Share prices are about 100% up on 2012 levels and have tracked dividends more closely than depressed earnings. A value gap between dividend flows and the price paid for these dividends has opened up. Our model of the JSE indicates that the exchange may be about 15% below “fair value” as predicted by reported dividends and interest rates. JSE All Share Index, earnings and dividends per share (2012=100) Source...

BL Premium

This article is reserved for our subscribers.

A subscription helps you enjoy the best of our business content every day along with benefits such as exclusive Financial Times articles, Morningstar financial data, and digital access to the Sunday Times and Times Select.

Already subscribed? Simply sign in below.



Questions or problems? Email helpdesk@businesslive.co.za or call 0860 52 52 00.