Up 30% this year + 7% dividend yield: Is it too late to buy this super stock?

These shares have rocketed 14% in the last month. Fairmont Equities' Michael Gable took a look at whether it's still worth adding to the portfolio.

| More on:
Piggy bank on an electric charger.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you were told of an ASX stock that has rocketed 30% this year while paying out 7.1% dividend yield, the first thought you have might be 'Can I get in on that action?'.

The team at Fairmont Equities correctly tipped McMillan Shakespeare Ltd (ASX: MMS) shares as a buy earlier this year when it was much cheaper.

But now that it's risen, Fairmont boss Michael Gable this week revisited the merits of the stock to see whether it's still worth diving in now.

A beneficiary of electric vehicle adoption

McMillan Shakespeare provides salary packaging and novated vehicle leasing services, as well as asset management and NDIS plan management.

According to Gable, the Group Remuneration Services (GRS) arm, which deals with the salary packaging and novated leasing, is "the main earnings driver".

And that unit has received a massive boost from the government's Electric Car Discount Policy, which provides fringe benefits tax exemptions for employers giving out benefits related to electric cars.

"In the 12 months since the introduction of the policy, the portion of McMillan Shakespeare's novated lease orders related to EVs has increased rapidly, to 36%," Gable said on the Fairmont Equities blog.

With electric vehicle adoption still in its infancy in Australia, Gable is expecting "further growth" in novated leasing volumes.

"In particular, EV availability in Australia remains limited, with only ~37 passenger and SUV models available. Further, it is estimated that ~85% of EVs sold have been below the Luxury Car Tax (LCT) threshold."

The balance sheet also looks healthy.

"McMillan Shakespeare has balance sheet capacity that could support capital management and/or acquisitions," said Gable.

"As at 30 June 2023, gearing — on a net debt to EBITDA basis — was 1.1x. This level is well below its recent peak of 2.5x as at 31 December 2019."

Recent stock price rise a preview of what's to come

McMillan Shakespeare's price-to-earnings (P/E) ratio has rocketed from 13.5 to 14.5 since Fairmont Equities flagged it as a buy a few weeks back.

After all, the share price has spiked up 13.9% since 23 October.

Gable, however, still considers it a buy.

"We still believe there is value in the shares, especially in light of potential upside risk to medium-term EPS growth forecasts from a stronger-than-expected take-up of EVs and EPS-accretive acquisitions."

The stock's rise since late last month has given the "sustainable" momentum.

"This price action is very positive and it implies that a low is in place for now and that McMillan Shakespeare should continue to trend higher."

And of course, don't forget the 7.1% dividend yield, which is fully franked.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended McMillan Shakespeare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Investing Strategies

Middle age caucasian man smiling confident drinking coffee at home.
Dividend Investing

Buy BHP, Telstra, and this ASX dividend share

Brokers are tipping these shares as buys for income investors. But why?

Read more »

The letters ETF sit in orange on top of a chart with a magnifying glass held over the top of it
Dividend Investing

Boosting passive income: With a 7.6% yield, is the YMAX ETF a good option?

Is this ETF's yield too good to be true?

Read more »

A woman standing in a blue shirt smiles as she uses her mobile phone.
Blue Chip Shares

2 ASX blue-chip shares that I think are excellent long-term buys

I think these blue-chip shares are impressive players.

Read more »

A man in a business shirt and tie takes a wide leap over a large steel trap with jagged teeth.
Bank Shares

5.75% yield: Are ANZ shares a dividend trap?

ANZ's dividend currently beats out its own term deposits.

Read more »

A woman smiles as she sits on the bus using her phone and listening to music through headphones.
Cheap Shares

2 compelling ASX shares on sale right now

These businesses look like low-priced opportunities.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Small Cap Shares

Guess which small cap ASX stock is rocketing 28% on $100m deal

It has been a very good start to the day for owners of this stock.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
Dividend Investing

Here are 3 buy-rated ASX dividend stocks to beat falling interest rates

Brokers are recommending these stocks to clients.

Read more »

A group of people in suits watch as a man puts his hand up to take the opportunity.
Blue Chip Shares

These top blue chip ASX 200 shares could rise 25% to 75%

Brokers are tipping these shares to deliver big returns over the next 12 months.

Read more »