Sirtex delivers mixed blessing

Sirtex has delivered a dividend well ahead of expectations, but at the stock's current price-earnings multiple it appears to be trading at a premium.

Liver cancer treatment developer Sirtex (SRX) has announced a better than expected dividend for the year, but that isn’t likely to quell concerns about its full valuation.

Sirtex will pay a final dividend of 12 cents a share for 2012-13 compared with consensus forecast of just 10.9 cents a share.

The final dividend represents a 20% increase over the previous year and is also ahead of analysts’ estimates of 11.5 cents a share for the current financial year.

Sirtex, which only pays one dividend a year, said that the robust uplift in distributions reflects its confidence in the strength of its business but warned in the same breathe that first quarter sales of its treatment was “soft”. Management will announce the sales growth figure in the first week of October.

The sales growth news won’t be welcomed by investors, especially at a time when there are growing worries about whether the stock has run ahead of fundamentals.

Sirtex shed 1% at the close today to $13.61 but is still very close to last week’s record high of $13.82.

This puts the stock on a price-earnings multiple of 29 times for 2013-14.

Sirtex is part of the Uncapped 100, and the dividend update was only given after the market closed. 

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