A quick summary
Ethan Allen’s “buy” rating has started (New York Stock Exchange: ETD) on September 13, 2022, based on strong financial performance, strong brand and stable dividend distribution. The stock is up ~20% since the first news story was published.stock at the time The article offers higher returns than the stock market on a year-to-date basis. We repeat our ‘buy’ rating based on strong earnings results in the second quarter and the continued attractiveness of the dividend yield.
Earnings in Q2 2022
For second quarter 2022 earnings, the company reported $1.10 per share. This is higher than the commonly reported consensus estimate of his $0.89 per share. The 23.60% earnings surprise triggered a moderate rally in the share price since the earnings announcement. Year-over-year earnings were down 2.4% for him, but not for us. As long as earnings remain strong to support our dividend-based theory, we believe it will impact our theory. EPS actually increased 16% year-over-year. Taking a step back, the company’s six-month earnings performance is 7.0% higher than his six-month figure last year, so the slight year-over-year decline in earnings in Q2 is a big deal. I don’t think so. Moreover, economic conditions have deteriorated in recent months, and given such cold economic conditions, such a modest decline on a year-over-year basis is a positive sign of the company’s resilience. thinking about.
Review of paper
Our paper focused on a company’s profitability and its ability to pay dividends sustainably during times of economic uncertainty. The company remains committed to its shareholder return program, and last December he paid an additional dividend of $0.32 per share. At current levels, the annual dividend yield is 4.62%, well above the S&P 500’s 1.67% dividend yield and the 3.5% US 10-year Treasury yield. The metric does not include special dividends the company pays to shareholders, such as the $0.50 per share the company paid mid-last year. While volatile, dividend payouts could be higher than current annual figures due to a history of special dividend payments.
strong balance sheet
In addition, the balance sheet remains strong with $140.4 million in cash, compared with $121.1 million as of June 30, 2022. The high cash balance and continued profitability of the business make this a very attractive dividend investment. our view. Not only that, but the company has no outstanding debt. Compared to debt companies with high leverage and interest burden, ETD has a robust balance sheet that helps sustain its business, shareholder program and uncertain economic environment. We believe ETDs continue to be excellent investments for income-oriented investors seeking exposure to the upside of equities.
gordon growth model
We have updated our Gordon growth model using our baseline what-if scenario to reflect a higher interest rate environment and a more moderate growth scenario for our dividend program. Compared to the previous model, we lower our annual growth rate expectations and increase the RRR based on the slightly higher growth rate. rate. Over the past three years he believes a growth rate of 5.00% is more than achievable. Quarterly dividend growth grew at a CAGR of 19% from $0.19 per share in 2019 to $0.32 per share in 2022. These assumptions gave us an intrinsic price. At $33.60 per share, it’s still up 21% from current levels.
Our update based on Q2 2022 earnings reaffirms our ‘buy’ rating, with the investment providing predictable and stable dividend distributions over the next few years, regardless of the economic environment. I think we will continue. The recent rise in earnings expectations should further boost confidence in the company’s business operations and management’s continued commitment to its shareholder dividend program.