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Aristocrat investors hit the jackpot with dividend up 22 per cent
It’s a fair bet that investors in Aristocrat Leisure (ASX:ALL) got a better return on their money that those millions of individuals using its pokies.
Whether it’s measured by the share price or dividend, this global gaming content and technology company and mobile games publisher hit the jackpot for shareholders in the financial year to September 30, 2024.
The share price was up 71 per cent over the past year to close on Tuesday at $68.93, while the total annual unfranked dividend of 42 cents was up 22 per cent. When added to the interim payout of 36 cents, shareholders pocketed 78 cents compared with 64 cents in the previous corresponding period, signalling Aristocrat’s confidence in its future cash flow and highlighting its strong financial performance and growth potential.
That Aristocrat was in a generous mood with shareholders was hardly surprising. Revenue grew five per cent, driven by an exceptional performance in its North American gaming operations, while the net profit after tax was up 17 per cent to $1.6 billion in the 2024 financial year.
The dividend boost highlights Aristocrat’s robust cash generation and commitment to rewarding shareholders. This dividend growth is set against an impressive 20 per cent year-over-year rise in diluted earnings per share (EPS) before amortisation, reaching $2.43.
The increase in the dividend payout ratio, which exceeds EPS growth, further emphasises Aristocrat’s approach to sharing its success with shareholders.
The company’s dividend strategy also offers a benefit to international investors, as it’s wholly unfranked and classified as Conduit Foreign Income (CFI). CFI distributions are typically exempt from Australian withholding tax, enhancing Aristocrat’s appeal to global shareholders.
However, the dividend reinvestment plan will not apply to this final dividend, potentially indicating the company’s intent to channel available cash flow into other strategic areas.
Beyond the dividend hike, Aristocrat also prioritised capital returns through an aggressive share buy-back program, adding another layer of value for shareholders. The company has committed up to $1.85 billion for buy-backs, with $1.6 billion of this already executed.
Trevor Croker, Aristocrat’s chief executive officer and managing director, said the strong result reflected the group’s competitive portfolio of scaled, world-class gaming assets, effective execution of its operational plans and broader growth strategy, as well as continued strong organic investment in talent, technology and product.
“This is an outstanding result, reflecting Aristocrat’s ability to grow through mixed operating environments and control a range of levers to deliver EPS growth of 20 per cent.
“The group also delivered strong revenue and EBITDA growth over the year, underpinned by Aristocrat Gaming’s performance that was led by an exceptional North American gaming operations result.”
On the back of the 2024 result, Croker painted an optimistic picture of the future.
“We continued to see strong momentum in our core business as we focus on portfolio performance and seek to capture the significant strategic opportunities in front of us. We’re committed to our capital management strategy and ongoing on-market share buy-back program, and to implementing the outcomes of the strategic review of the group’s casual and mid-core gaming assets.”
Aristocrat recently announced the sale of Plarium Global for US$620 million ($949 million), with contingent consideration of up to US$200 million ($306 million), to Modern Times Group. The contingent consideration is subject to the achievement of certain financial targets over calendar years 2025 to 2028.
