RIVERSTONE: This stock is +37% year-to-date, yet has a yield of about 6%

If there's one thing that strikes investors about Riverstone Holdings, it's the high dividend yield.

The Singapore-listed glove producer generates lots of cashflow consistently from a business that's profitable consistently.

Back in May 2024, when the stock price was around 80 cents, the expected yield sure looked delicious. (See: RIVERSTONE: Will it deliver 2024 dividend yield of ~10%?)

With the stock having risen to 90 cents pre-3Q results, and now 95 cents post-results (+37% year-to-date), the yield has dipped accordingly.

UOB Kay Hian and CGS International are modeling a payout ratio of 100-120% for this year, translating to an updated yield of 6-7.6%, respectively.

Here's Riverstone's track record:

dividends9M24

As the chart above shows, Riverstone the absolute amount of dividends declined from the 2021 peak as profits started to normalise post-pandemic.

To date, Riverstone has declared 12 sen/share.

A higher final dividend is expected in analysts' models, supported by the fact that Riverstone ended 3Q24 with zero debt and RM790 million (53.3 sen/share) cash. </style="font-size:>

Here are highlights of the company's 3Q24 and how it relates to 1H24 performance:

Revenue and Profit Growth
After a 7% year-on-year increase in revenue in 1H2024, driven by demand recovery in both cleanroom and healthcare gloves, revenue in 3Q grew 33.9% yoy.

3Q net profit increased by 22% yoy, with the cleanroom segment seeing a 10% qoq increase in volume due to higher demand from the electronics and pharmaceutical sectors.

9m2024 profit Inset: Wong Teek Son, CEO.

Gross Margin Expansion
In 1H2024, Riverstone's gross margin expanded by 12 percentage points (ppt) yoy, driven by lower raw material costs and higher-margin cleanroom glove sales.

By 3Q2024, despite some margin compression due to higher input costs, the company maintained a healthy gross profit margin of 34.7%, with a strong overall margin of 37.8% for 9M24.

Capacity Expansion
Riverstone's ever ongoing capacity expansion will see, by end 2024, six new production lines for cleanroom gloves, along with three lines for customized healthcare gloves.

This expansion will increase total capacity from 10.5 billion to 11.9 billion gloves by 2025, positioning the company for future growth.

Dividend Payout
Riverstone increased its dividend payout significantly in 1H2024 -- from 5.0 sen in 1H2023 to 8.0 sen.

For 3Q2024, the company declared a third interim dividend of 4.0 sen, bringing the total payout ratio for 9M24 to 82%.

Riverstone's robust balance sheet boasts cash balances of RM790 million as at end-3Q24 (1H24: RM761 million).

Conclusion
Overall, Riverstone Holdings has seen significant positive developments, including strong revenue and profit growth, expanded production capacity, higher dividends, and continued strength in its cleanroom glove segment.

These gains were partially offset by challenges such as margin compression from rising input costs and forex losses, as well as competitive pressures on healthcare glove prices.

Despite these headwinds, Riverstone's financial position remains solid, supported by robust cash flow and an attractive dividend yield.

See UOB KH's report here

RIVERSTONE: This stock is +37% year-to-date, yet has a yield of about 6%

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