Are JB Hi-Fi shares still a buy for dividends after soaring 38% in 6 months?

Is this ASX dividend share a bargain?

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JB Hi-Fi Ltd (ASX: JBH) shares have been an effective choice for dividends over the past year, with significant growth of the annual payout per share. The ASX retail share has delivered enormous gains, increasing by 38% in the past six months and 51% in 2024 to date.

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The FY24 result saw the business announce its largest-ever annual dividend per share.

Long-term shareholders have done incredibly well out of the business. But, the question now is whether buying new JB Hi-Fi shares makes sense today.

For the income-seeking investors, let's examine whether this high-flyer is an attractive opportunity.

Dividend projections

In FY24, the company declared an annual ordinary dividend of $2.61 per share, which represented a reduction of 16.3%. However, it also declared a special dividend per share of 80 cents, bringing the full-year dividend per share to $3.41, a year-over-year increase of 9.3%. This was the biggest annual dividend the business has ever paid.

Broker UBS is expecting a very similar annual ordinary dividend for owners of JB Hi-Fi shares in FY25, with a possible payment of $2.60 per share. But, after this small reduction, the annual payout is forecast to steadily increase in FY26 onwards.

For the 2026 financial year, JB Hi-Fi is forecast to pay an annual dividend per share of $2.73. In FY27, the business could pay an annual dividend per share of $2.85.

This means that in each of the next three financial years (starting in FY25), the grossed-up dividend yields (with the franking credits included) could be 4.5%, 4.8%, and 5%, respectively.

Is the JB Hi-Fi share price an opportunity?

The FY24 result was not inspiring in terms of the financials. While total sales were flat at $9.6 billion, net profit declined by 16.4% to $439 million.

But, there were a couple of positive updates.

First, the company announced it was acquiring E&S Trading, a business with a premium offering across kitchen, laundry and bathroom product segments. This gives JB Hi-Fi a complementary business with new and expanded product categories. It's expecting to grow E&S Trading in Victoria and nationally.

Second, the July sales update was strong, with total sales growth of 5.6% for JB Hi-Fi Australia, 12.2% for JB Hi-Fi New Zealand and 2.7% for The Good Guys. While sales growth doesn't automatically mean profit growth, it's a promising sign.

UBS predicts JB Hi-Fi's net profit could rise $1 million in FY25 to $440 million and then increase to $461 million in FY26 and $481 million in FY27.

This means the JB Hi-Fi share price is valued at 20.5x FY25's estimated earnings and 18.7x FY27's estimated earnings.

I think JB Hi-Fi's earnings are more defensive than they used to be, with households viewing smartphones and laptops as essential for work, education, communication and so on.

However, that doesn't mean I think it's a great buy trading at a much higher price-earnings (P/E) ratio than it normally does.

Looking at UBS' rating, the broker is calling it a sell, with a price target of $64. That implies a possible drop of 22% over the next year.

Motley Fool contributor Tristan Harrison 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 Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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