According to the Zhītōng Cáijīng APP, in the first half of the year the market had a preference for high dividend stocks, as these stocks tend to have a stable fundamental and excellent profitability, combined with high dividends, they are an excellent choice for defensive asset allocation. Netdragon (00777) ranked tenth among companies with a market capitalization of over 5 billion HKD on the HK main board market as of June 30, 2024, thanks to its outstanding dividend rate performance, which highlights its stable profitability and generous return to shareholders. In terms of product structure, the operating income for products ranging between 10-30 billion yuan are respectively 401/1288/60 million yuan.
In recent years, Netdragon has developed steadily and has also attached great importance to shareholder returns. In 2023, Netdragon distributed a final dividend of 0.4 HKD, and a total annual dividend of 1.8 HKD, with a dividend yield of over 15%.
In addition, since its listing 16 years ago, Netdragon has never stopped distributing dividends twice a year, and has distributed dividends 37 times (including 4 special dividends), with a total of over 17 HKD per share. While there are many high-quality annual dividend stocks in each sector of the HK stock market, there are not many shares that pay dividends in the HK game sector, and there are few that have paid dividends consistently for over 10 years. Netdragon is one of the few HK A-shares companies that have continuously paid dividends for over 15 years.
Dividend yield is an important indicator for measuring the dividend level of listed companies. A high dividend yield means that the company not only has strong profitability but also is willing to share its business successes with shareholders, which is attributed to Netdragon's outstanding performance in many aspects.
Firstly, Netdragon's main business has grown steadily. In 2023, the game business rebounded strongly, with a full-year revenue of 3.76 billion yuan, a historic high, and game revenue has grown in nine of the past ten years, increasing 3.9 times in ten years. The education business completed the overseas education spin-off and listing (NYSE) and was renamed Mynd.ai in December last year. In 2023, Mynd.ai's gross margin was 25%, up 1.3 percentage points YoY, and overall classified operating expenses decreased by 10.8%.
Secondly, Netdragon's overall profitability is healthy, and its cash flow is stable, providing strong support for the company's high dividend yield. Data shows that company operating cash flow has exceeded RMB 1 billion for five consecutive years from 2019 to 2023. Netdragon's regular dividends have also been steadily increasing, from HKD 0.2 per share in 2017 to HKD 0.8 per share, a four-fold increase.
A healthy balance sheet and adequate cash reserves provide Netdragon with powerful support to achieve a high dividend yield. Netdragon's asset-liability ratio was 40.53% in 2023, and its interest-bearing debt ratio (including convertible securities and bills) was only 15.82%. In December 2023, the company redeemed convertible and exchangeable bonds for $125 million in principal, but its cash reserves were still abundant. As of the end of 2023, its cash and cash equivalents plus bank deposits totaled 2.57 billion yuan, accounting for 24.8% of total assets.
With stable business operations, Netdragon's stock price currently has a high safety margin. Coupled with its high dividend payout ratio for many years, and its current valuation advantage in the industry, it is considered a high-value investment for investors.