TFS stuns on dividend

Sandalwood plantation company TFS Corporation (TFC) record its best one-day gain in history after the company posted a more than doubling in earnings and reinstated its dividend.

The stock rallied 23.4% to a more than five month high of 58 cents after the company reported a 223.9% surge in cash net profit to $21.3 million and a 117.8% increase in earnings before interest, tax, depreciation and amortisation to $51.8 million for the 2012-13 financial year thanks to strong sales of its forestry projects and an expansion of its plantation program.

Management also said that first harvest of Indian sandalwood from its Kununurra plantation in Western Australia will being in next month. The first stage of the harvest will cover around 30 hectares.

The company is feeling confident about its financial future and has declared a three cent fully franked dividend. The last time TFS paid a dividend was two years ago.

Future dividends will be tied to ongoing cash flow and profitability with management targeting a payout ratio of 30% to 50% of net cash profits. Assuming the same rate of dividend for 2013-14, the stock would generate a yield close to 15% once franking credits are included.

TFS is part of the Uncapped 100.

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Source: Bloomberg