Sunday, 15 October 2017

Dixons Carphone

Dixons Carphone Is Now A Bargain Buy

At the time of writing Dixons Carphone is trading at 169.3p after a 0.35% fall on Tuesday. Can this retail giant enhance my wealth?
The fundamentals on Dixons Carphone look too cheap to ignore. The PE is a measly 5.02 and the dividend yield is a chunky 6.65%. Dividend cover was three times earnings for 2017 and 3.1 times earnings for 2016. This is a large margin of safety for the dividend and gives it scope to rise in future. In fact dividend growth has been very good as well at over 15% for 2017 and over 25% for 2016.

The shares have had a torrid time of it over the past year. 12 months ago they were trading close to 400p. Even a month ago they were trading at 270p. The year low has been 155p. At around the current levels I expect a level of support to form. Although there will be some pressure on consumer spending, the Christmas period is not far off and the new iphone is to be brought out soon. Dixons Carphone also has some European exposure to give it some diversity.

So I believe the shares are a buy at the current level with a target price of at least 200p.

One other retail giant that has recovered recently is Next. The shares are up 1.21% at the time of writing on Tuesday and currently change hands at 4280p. The fundamentals are still reasonable with the PE being a cheap 9.58 and the visible dividend yield being 3.69%. When you take the special dividend into account, with the next payment being made on 1 November of 45p, the share is yielding around 6%.

Next has recovered nicely since early July when it was trading at around 3600p. At these levels I rate the share as a solid hold.

This article was written a month ago. But Dixons Carphone is still a buy around these levels.

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