Could A2 Milk shares pay a dividend in 2023?

The Australian share market is among the most generous in the world, with a good portion of companies on the S&P/ASX 200 Index (ASX: XJO) rewarding their shareholders with dividends each year.

One popular share that has bucked the trend is A2 Milk Company Ltd (ASX: A2M). In the seven and a half years that it has traded on the ASX boards, the infant formula company’s shares have never provided investors with a dividend.

That’s despite the company sitting on a mountain of cash. At the end of FY 2022, it had NZ$816.5 million in its bank account.

When will A2 Milk shares pay a dividend?

The good news is that there’s reason to believe that A2 Milk shares could pay a dividend in the not so distant future.

In fact, management hinted that this could be the case last year. It said:

The Board is actively reviewing capital management initiatives, including a potential share buy-back.

Since then, the company has launched a NZ$150 million on-market share buy-back. Which, as of its last update, has seen the company acquire and retire approximately 13.5 million shares. These shares currently have a market value of $90.7 million, which means there’s still plenty more buying to come.

Back to dividends, according to a recent note out of Macquarie, its analysts believe a dividend could be coming in FY 2024.

Its analysts are anticipating a maiden dividend of 12.4 cents per share that year. Based on where A2 Milk shares are currently trading, this represents a modest 1.7% dividend yield.

Though, it is worth acknowledging that Macquarie isn’t particularly positive on the company despite the prospect of a maiden dividend. It currently has an underperform rating and $4.25 price target on its shares.

All in all, 2023 might be a little too soon for a dividend, but 2024 seems entirely possible.

The post Could A2 Milk shares pay a dividend in 2023? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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 A2 Milk. 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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