Steadfast share price on watch as dividends jump 13%

The Steadfast Group Ltd (ASX: SDF) share price is on watch after the Aussie insurer reported a strong underlying result last night.

What does Steadfast do?

Steadfast is Australia’s largest general insurance broker with growing operations in Asia and Europe.

The insurer boasts a network of more than 458 general insurance brokerages in Australasia.

Why is the Steadfast share price on watch?

The statutory numbers were soft as Steadfast reported a $55.2 million net profit after tax (NPAT) loss due to acquisition and impairment costs.

However, on an underlying basis, Steadfast enjoyed a healthy period of growth in the year ended 30 June 2020 (FY20).

The insurer reported a 15.5% increase in earnings before interest, tax and adjustments (EBITA) to $193.3 million. That was on the back of a 21.4% jump in underlying revenue to $688.3 million with underlying NPAT rocketing 19.0% to $89.2 million.

The Steadfast share price is on watch this morning after yesterday’s result which was underpinned by 36% growth in network gross written premiums (GWP) to $8.3 billion. That included 6.3% of organic growth before including Authorised Representatives and IBNA contributions.

The insurer reported record organic GWP growth in its Steadfast Underwriting Agencies business. Segment GWP jumped 13.1% to $1.33 billion with underlying EBITA up 14.7% to $105.8 million.

Steadfast’s insurTech segment also posted strong growth figures. GWO transacted through the Steadfast Client Trading Platform (SCTP) jumped 45% to $638 million in FY20.

Free cash flow jumped 27.2% to $70.6 million driven by strong operating cash flow figures.

Steadfast remains conservatively geared at 21.5%, well below its 30% maximum gearing ratio, with $323 million of borrowings.

Dividends

Steadfast reported a 13.2% increase in its final dividend to 6.0 cents per share (cps), fully franked.

Combined with its 3.6 cps interim dividend, the group’s final dividend is 9.6 cps up 12.9% on its FY19 payout.

Based on yesterday’s closing Steadfast share price that translates to a 2.7% dividend yield per annum.

FY21 outlook

The Steadfast share price will be one to watch as investors process the insurer’s FY21 guidance.

Steadfast is projecting underlying EBITA of $235 million to $245 million, compared to $193.3 million in FY20.

Underlying NPAT is forecast to increase from $89.2 million to between $115 million and $122 million this financial year.

The coronavirus pandemic has created ‘significant uncertainty’ but Steadfast sees trading conditions similar to those seen in Q4 2020.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Steadfast Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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