3450% Dividend In FY23: Brokerage Sees 14% Upside In Midcap Stock With 6.6% Dividend Yield

360 One WAM, formerly known as IIFL Wealth Management traded is in focus ahead of its ex-dividend date later in the current week. On Wednesday, the midcap stock gained by 1.13% on BSE. Brokerage ICICI Securities expects a 14% potential upside in 360 One as AUM growth offers support to the company's earnings outlook ahead. 360 One is among high dividend paying stocks as in FY23 it paid a total of 3450% and has a high dividend yield of 6.6%. For FY24 as well, the company has announced two interim dividends, and it will trade ex-dividend on July 28 for a 400% second interim dividend.

At the time of writing, 360 One stock ended at Rs 519.95 apiece, up 0.21% on BSE. The stock has overall advanced by 1.13% with an intraday high of Rs 524.75 apiece. The stock is inching closer to its 52-week high of Rs 538 apiece on BSE.

As per the regulatory filing, the company declared a second interim dividend of Rs 4 per share for FY24. In percentage terms, the dividend payout is 400%. The company fixed July 28 as the record date for ascertaining the eligibility of shareholders of the company. Hence, the stock will turn ex-dividend on July 28 as well.

Earlier, the company declared a similar 400% first interim dividend for FY24.

So far, in the current fiscal, the company's dividend payout is to the tune of 800%.

In the financial year FY23, the company paid a total dividend of 3450% aggregating Rs 34.5 per equity share.

At the current market price, the company's dividend yield is at 6.63%.

In its latest research note, ICICI Securities said, "360 One WAM Ltd (IIFLW) maintains its guidance for a profit of Rs 8 billion in FY24 (up 20% YoY) with expectations of 6% MTM gains and Rs 400 billion in ARR flows (up 43% YoY) while maintaining its ARR retention rate guidance (ARR =
annual recurring revenue). Q1FY24 performance shows strong 33% YoY growth in ARR AUM while there are factors that will help increase the annual retention rate beyond 73bps reported in Q1FY24."

Further, the brokerage's note added, "Our estimates include 27% ARR AAUM CAGR between FY23-FY25E vs 28% growth guidance in FY24E and 33% actual growth in FY19-FY23. We expect ARR yields to trend flattish at ~0.72% to 0.74% in FY24E/FY25E vs guidance
of 78bps for FY24. ARR revenue CAGR is expected at 26% between FY23- FY25E to Rs 17.6 billion while TBR revenues are expected to be Rs 2.7 billion/3.9 billion in FY24E/FY25E vs Rs 824 million in Q1FY24. We estimate the cost-to-income ratio to contract from 46% in FY23 to 44% in FY24E and 43.5% in FY25E vs guidance of 44% in FY24."

Also, the brokerage estimates the company's PAT of Rs 7.9 billion / 9.6 billion in FY24E / FY25E. Increase in multiple factors the strong AUM growth seen in Q1FY24 (capital market momentum will lend a further boost), and recovery of retention rates on ARR assets.

"Maintain BUY with a revised target price of Rs 593 (earlier: Rs 501) based on 22x (earlier: 20x) FY25E EPS of Rs 27 (earlier: Rs 25)," the brokerage added.

Considering the current market price and the brokerage's TP, 360 One has the potential to rise by 14% ahead on BSE.