HVN is one of the highest yielding blue-chip stocks, with a very attractive grossed-up yield of 9.8%. The group has been a staple of retail electronics and furniture for decades but could the shift to online threaten the retailer, should I buy Harvey Norman Shares?
Should I Buy Harvey Norman Shares – About
Harvey Norman was founded in 1982 by Gerry Harvey and Ian Norman and went public on the ASX 5 years later in October 1987. HVN has had two share splits since its IPO (2:1 in 1997 and 5:1 in 1999).
Harvey Norman Holdings Limited grants franchises to independent proprietors under three leading brand names: Harvey Norman, Domayne and Joyce Mayne.
- Harvey Norman was established in October 1982 by Gerry Harvey and Ian Norman
- Harvey Norman went public in October 1987
The proprietors sell products in the following categories: electrical goods, furniture, computerised communications, bedding and manchester, kitchen appliances, small appliances, bathroom and tiles, carpets and flooring.
It’s also important to point out that in some of their financial reports HVN lists total sales, however, a portion of these sales may actually be generated by their franchise stores, which count towards the consolidated group revenue’s.
HVN Share Price
Shares in HVN are up about ~5.6% over the past 12-months to trade at a share price of $4.91 and a market capitalisation of $6.12billion
The group is trading towards the bottom of the 52-week range which is $6.09 – $4.33 per share.
The shares of Harvey Norman have had a decent run-up in recent months to be sitting close to all-time high’s however, it is important to keep in mind the macro-environment in Australia at the current times.
There has been a large amount of government based stimulus recently and with people being unable to spend their disposable income on travelling oversea’s more and more people were turning to focus on improving their livelihood by improving their homes and upgrading tech.
After surveying 100 Investors about their current HVN shares sentiment: BUY-HOLD-SELL, as well as their target price over the next 12-months here are the results;
The results from this survey show there is currently a strong Hold investor sentiment on ASX.HVN shares. So how much are HVN shares worth? Let’s get into it.
Harvey Norman Dividend
Harvey Norman has a gross dividend of 9.80% paying a $0.38 per share dividend over the TTM.
| Share Price | $4.91 |
| DPS (Trailing 12-Month) | $0.38 |
| Gross DPS (Trailing 12-Month) | $0.5429 |
| Dividend yield | 6.86% |
| Gross yield | 9.80% |
| Payout Ratio | 61% |
| DRP | No |
| DRP Discount | – |
If you are interested in further details on the Harvey Norman Dividend Check out the Harvey Norman Dividend Report.
Harvey Norman Shares – Historical Financials
Over the past 30-years, Harvey Norman has successfully grown their earnings per share and dividend per share. Book value over the same period has not grown as significantly as earnings over the period.
Interestingly enough HVN EPS has peaked back in 2008 and recently in 2020 which seems to have coincided with the last two recessionary periods coupled with a high amount of government stimulus in Australia.
During the last 30-years, HVN has significantly grown revenue from less than $50million in 1990 to over $2.5billion in 2020.
Operating profit after tax has remained relatively stable at around 30% of consolidated revenues. The below chart has been restated as of 2005 to remove the additional 'sales' generated from franchise stores that aren't attributable to the consolidated revenue result.
Potential investors can find the yearly financial results on the Harvey Norman Investors Page.
Harvey Norman has been a staple of the ASX for the last 20-years and investors have performed well. The business seems to have a reliable 30% profit margin on revenues and has grown EPS for a number of years. If considering a stake in HVN shares we would recommend doing research on the timing of the investment.
Harvey Norman Shares Fundamentals
| Market Capitalisation | $6,117,892,671 |
| Share Price | $4.91/share |
| EPS | $0.586 |
| DPS | $0.38 |
| NTA per share | $3.30 |
| Book Value | $3.10/share |
| P/E | 7.28x |
| Debt/Equity | 14.4% |
Market Cap:
Harvey Norman Group is a mid-cap company with a total market capitalization of just over $6 billion. This places it as the 87th largest listed ASX company by market cap. For a company of this size, we expect to see the company experience a decent rate of top-line growth and a stable bottom line.
PE Ratio:
HVN has a low P/E ratio in comparison to the broader market. However, low P/E should always be given an extra look over as investors are potentially expecting subdued growth in the years ahead.
Earnings, Debt, and NTA per Share:
We can see HVN shares currently have earnings per share of $0.58, Another way of looking at this is that 15% of their share price is backed by solid earnings. HVN also have a debt to equity ratio of 14.4% which seems to be well serviced by the group's earnings.
Harvey Norman Shares - Ownership and Insider Transactions
HVN Shares Ownership Breakdown
Individual Insiders own a significant amount of the company with over 40.9% ownership stake. This is quite a high insider ownership for a mid-cap company.
The general public and private companies own 28.7% and 18.3% respectively.
Recent Insider Transactions
| Date | Value | Name | Entity | Shares | Max Price |
|---|---|---|---|---|---|
| 22 Sep 21 | +$52,825 | Kay Lesley Page | I | 10,565 | AU$5.00 |
| 22 Sep 21 | +$998,000 | Gerald Harvey | I | 200,000 | AU$4.99 |
| 26 Nov 20 | +$44,794 | Kay Lesley Page | I | 9,390 | AU$4.77 |
Harvey Norman Top 5 Shareholders
One of the original Co-founders of the business still holds a significant portion of HVN ASX Shares. Gerald Harvey has over 33% of the ownership stake in the business. This has been the case for quite a number of years now.
Current CEO Kay Lesley Page holds ~1.6% of the company with Margeret Harvey owning 4.7% of the business.
| Ownership | Name | Shares | Value |
|---|---|---|---|
| 33.88% | Gerald Harvey | 422,105,640 | A$2.1b |
| 16.49% | Dimbulu Pty Ltd | 205,404,292 | A$1.0b |
| 4.7% | Margaret Harvey | 58,592,289 | A$287.7m |
| 2.81% | Franklin Resources, Inc. | 34,972,634 | A$171.7m |
| 2.48% | The Vanguard Group, Inc. | 30,893,871 | A$151.7m |
| 1.61% | Enbeear Pty Limited | 20,063,673 | A$98.5m |
| 1.59% | Kay Lesley Page | 19,856,315 | A$97.5m |
The top 2 shareholders in HVN shares hold over 50% of the shares on issue, meaning that they could significantly influence the direction of the business going forwards.
Should I Buy Harvey Norman Shares - Prophets Take
Harvey Norman shares seem to be trading at heights not seen since prior to the 2008 GFC. The shares are trading towards the top of all-time heights, however, are down slightly from the 52-week heights of $6.09.
The group has a track record of paying dividends, which have typically increased over time. The group currently pays a dividend of 6.1% which is more than the ASX average. HVN seems to have been a staple for mum and dad investors for years.
Whilst the group has a relatively low P/E of 7 which is less than the ASX200 average we can't see a large amount of growth coming from HVN in future years. There may be a possibility where the group is able to capture a higher market share from online sales, however, at the moment the household name online is either Kogan or Amazon in our opinion.
The company has a good level of insider ownership with the co-founder Gerald Harvey owning over 30% of the company. This is decently high for a mid-cap company.
We see Harvey Norman shares and in our opinion as not having enough potential upside to justify taking a large position in this company at the current time. As the world continues to re-open from the COVID pandemic we may start to see a switch away from disposable spending on furniture, homewares and electronics to more overseas holidays etc.
We will revisit our take on HVN shares should the group start focussing on online and be able to achieve higher levels of top-line growth.
