The Sims Ltd (ASX: SGM) share price will be on watch tomorrow as the ASX 200 metals company turns ex-dividend.
Tomorrow, Sims will be taking away entitlements to its partially franked final dividend of 50 cents per share.
This means that today is the final day to lock in this dividend, which will be paid on 19 October.
Investors buying Sims shares tomorrow won't score the latest dividend. But they'll likely be able to pick up shares at a reduced price.
This is because a company's shares usually fall on the day they turn ex-dividend as the value of the dividend leaves the share price.
While the extent of the drop is influenced by market sentiment, it's usually in relative proportion to the size of the dividend.
Given that Sims' final dividend equates to a yield of around 3.7%, the Sims share price will likely come under fire tomorrow as shares turn ex-dividend.
Image source: Getty Images
Did Sims crush it in FY22?
FY22 was a bumper year for Sims. Revenue jumped by 57% to $9.3 billion, driven by a combination of higher sales volumes and higher sales prices.
This strong growth flowed through to earnings as the company delivered its best underlying earnings before interest and tax (EBIT) results on record. Underlying EBIT nearly doubled to $756 million.
In terms of segment performance, North America Metal achieved the largest improvement in underlying EBIT, which surged by 114% to $293 million. This was driven by higher trading margins and higher volumes on the back of strong demand from domestic and export markets. Recent acquisitions also had a hand in the growth.
Commenting on the results, CEO and managing director, Alistair Field said:
I am proud that we delivered the strongest Underlying EBIT result on record and significant trading margin and volume increases. I am also pleased that return on productive assets grew by 16.0 ppts to 39.0%, and cash flow from operations increased by 323.3%, enabling us to lift our cash distribution to shareholders, while maintaining our balance sheet strength.
On the back of these results, Sim declared FY22 dividends of 91 cents per share, partially franked. This represents a mammoth 117% hike from the annual dividends of 42 cents declared in the prior year.
At current prices, Sims shares are spinning up a trailing dividend yield of 6.8%.
The company is also delivering further returns to shareholders through an on-market share buyback.
What's the outlook for the Sims share price?
In response to Sims' FY22 results, broker Goldman Sachs retained a neutral rating on Sims shares.
Goldman remains positive on the long-run demand trend for scrap metal. However, the broker is forecasting a ~50% drop in Sims' EBIT in FY23 as global scrap prices head south and global steel demand weakens.
Goldman has a 12-month price target of $16.70 for Sims shares, which implies a potential upside of 20% from current levels.
The Sims share price last traded at $13.38. It's tumbled by 38% over the past six months but zooming out over the past year, Sims shares have gained 6%.
In comparison, the S&P/ASX 200 Index (ASX: XJO) has backpedalled by 14% and 10% over the last six and 12 months, respectively.
