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Shares in companies that can increase their dividends over time can be large sources of passive income. Especially when they trade at unusually cheap prices.
That is the case with Associated British foods (LSE: ABF) -The shares are at a minimum of 52 weeks, dividend yield in a maximum of 10 years and growth has been impressive. So should investors consider it?
Business (s)
Depending on how you see it, associated British foods is an impressively diversified company or a business mixture that really doesn't make much sense together. It can be a bit of both.
The company has five divisions. These include sugar, agricultural and edible foods, but the largest of these by some margin is retail trade, which is the value of fashion and the Primark lifestyle.
From an investment perspective, I am much more positive about Primark than about any of the other units of the company. I think the retail operation is where growth is likely to come.
My opinion with associated British foods is that investors should consider it when Primark for itself is worth the price of shares. And with the stock in a minimum of 52 weeks, that time could be now.
Valuation
ABF currently has a market capitalization of £ 13.7 billion. In addition to this, it has about £ 2 billion more in net debt for investors who plan to buy shares to consider in their calculations.
However, Primark generated £ 1.1 billion in operational revenues in 2024. This is just over half of the company's profits and could be sufficient to justify all market capitalization itself.
According to this, the shares quote a multiple of approximate price price (P/E) of 14, including the company's debt. I don't think it's much for a business (Primark) with strong long -term perspectives.
The retailer has a store -based business model instead of electronic commerce. This helps reduce online yield costs, what I see as a great advantage, but there are some risks to consider.
Risks
The latest Primark results have been disappointing, and demonstrate some of the challenges facing the business. Sales in general grew only 2% during the 16 weeks that led to January 4. This was largely due to a challenging commercial environment in the United Kingdom and Ireland, which represents about 45% of sales. Similar sales fell 6% and the retailer also lost market share.
That tells investors that growth is not guaranteed in any way. But things were much more positive in other places: income grew 17% in the United States and Primark still has 29 stores throughout the Atlantic.
I think that means that there is a lot of reach for expansion. And I hope this provides a great boost to profits in British foods associated as a whole, especially when short -term problems decrease.
A purchase opportunity?
For me, the investment case is about Primark. And despite the short -term challenges, I see a safety margin in the current price of the shares.
Therefore, I believe that investors should consider the action with their potential for passive growth and income. Despite the challenges, I do not see that the opportunity has been better.
(Tagstotranslate) category. Dividend-Shares (T) category. Investiging
