The Harvey Norman Holdings Limited (ASX: HVN) share price will be on watch tomorrow as the ASX 200 retail share turns ex-dividend.
As of tomorrow, Harvey Norman shares will be trading without entitlements to the company's latest fully franked final dividend of 17.5 cents. In other words, Harvey Norman shares will be going ex-dividend.
This means that today will be the last day to lock in this dividend, which will be paid on 14 November.
Given that Harvey Norman does not have a dividend reinvestment plan (DRP), shareholders will have no choice but to receive this payment in cash.
After today, investors shopping for Harvey Norman shares won't score the company's latest dividend payment. But they'll likely be able to scoop up shares at a discount.
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.
The extent of the fall varies based on investor sentiment and what the market is doing on that particular day. But it typically reflects the size of the dividend payment in question.
In Harvey Norman's case, its latest final dividend of 17.5 cents represents a yield of 4.2%. So, the Harvey Norman share price will likely face plenty of downwards pressure tomorrow.
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How did Harvey Norman perform in FY22?
The ASX 200 retail share handed in its FY22 results on the final day of ASX reporting season in August.
Total system sales revenue marginally backpedalled by 1.7% from the prior year to $9.6 billion, but still came in 13.0% higher compared to FY20.
Meanwhile, net profit after tax (NPAT) slipped by 3.6% to $811 million as the company battled COVID lockdowns, supply chain issues, and labour shortages during the year.
The retailer ended FY22 with 169 franchised Harvey Norman complexes in Australia, 19 franchised Domayne complexes, seven franchised Joyce Mayne complexes, and 109 overseas company-operated stores.
Despite the reduction in profits, Harvey Norman raised its full-year dividends by 7% to 37.5 cents per share, fully franked. At current levels, this puts Harvey Norman shares on a mighty trailing dividend yield of 9.1%. With the benefit of franking credits, this yield grosses up to a whopping 13.0%.
What's the outlook for the Harvey Norman share price?
Brokers are mostly bullish on the Harvey Norman share price.
In the wake of the ASX 200 retailer's FY22 report, Citi retained its buy rating on Harvey Norman shares with a 12-month price target of $4.70. With shares last closing at $4.12, this implies potential upside of 14%. In Citi's view, official retail data, industry feedback, and retailer trading updates suggest household spending will be resilient into FY23.
Goldman Sachs also has a buy rating on Harvey Norman shares. Its price target is slightly higher than Citi's at $4.80, implying potential upside of 17% over the next 12 months.
Goldman believes that a slowing macroeconomic and housing market is sufficiently factored into consensus expectations. The broker also believes Harvey Norman is more defensive on competition due to its regional, premium boomer exposure and a higher proportion of bulky items, which are not yet shipped by Amazon (NASDAQ: AMZN).
However, Macquarie isn't as keen on Harvey Norman shares. After digesting the retailer's recent results, Macquarie retained its neutral rating, remaining cautious about the outlook for consumer spending in 2023.
In terms of dividends, Macquarie is forecasting Harvey Norman to slightly wind back its annual payment in FY23 to 35 cents. Meanwhile, Citi is forecasting a steeper decline to 31 cents. This represents prospective forward dividend yields of 8.5% and 7.5%, respectively.
