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...

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