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Cannacord Genuity sees scope for higher dividends at Go-Ahead
A strong balance sheet and "solid" earnings from the bus segment will allow Go-Ahead to maintain or raise its dividends going forward, according to analysts at Cannacord Genuity.
Absent new franchise wins, challenging market conditions in the UK bus markets, together with falling earnings from rail (excluding one-offs), suggested earnings growth would turn negative in coming years, analyst Gert Zonneveld said.
Indeed, at the half-year stage and on a like-for-like basis, regional bus volume growth was down by 1.2%.
However, Go-Ahead was exploring growth opportunities overeas and "in the meantime, a strong balance sheet and solid bus earnings, however, should allow the company to maintain or increase its dividends going forward," Zonneveld explained.
Notably, his comments came even as the shares' dividend yield was running at more than 7%.
Cannacord also noted the reduction in the company's net debt from £286.7m to £254.0.
Zonneveld stuck by a 'buy' recommendation and 2,080p target price on the shares.