LTG declared a special cash dividend of 24 centavos per share late last Friday. This increases the total dividend to Php0.86 billion over the previous 12 months, giving in a gross yield of 6.56 percent, the highest among publicly traded firms with a market capitalization of more than Php100 billion.
As previously stated, this high dividend yield looks sustainable in light of the cash generated by its 50%-owned tobacco subsidiary PMFTC. Additionally, PNB’s recent moves may provide more pressure to LTG’s payout ratio. Prior to the announcement of the property dividend, the bank had paid out just once in the preceding 27 years. This is despite the company earning Php60 billion in revenues over the previous 17 years. As a result, its parent company’s capacity to issue cash dividends has been limited.
As a general rule, holding corporations cannot designate their subsidiaries’ profits as unrestricted until they are posted in the form of dividends. Thus, LTG’s unconstrained retained profits would increase by about Php13.5B as a result of the property dividend. This confirms our belief that the stock will continue to yield well for years to come. Reiterate to buy.