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Hyundai Motor's Biggest-Ever Dividend Greeted with Outlook Concern

January 27, 2015
2 min to read


Hyundai Motor Co announced its biggest-ever dividend on Thursday to appease shareholders angered by a $10 billion property buy, but the payout failed to distract investors from growth prospects clouded by declines in the rouble and yen, reported Reuters.


Shares of the Korean automaker - the world's fifth-biggest when paired with sister Kia Motors Corp - ended at a more than two-week low after the announcement. Earlier in the day, Hyundai missed analyst estimates by posting a 19 percent decline in October-December net profit.

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Hyundai-Kia splashed out on land for new headquarters last year as economic turmoil in Russia undermined earnings in a country where the pair rank second. Meanwhile in the U.S., the pair's No.2 market, a weak yen made rival Japanese cars cheaper.


Currency risks are likely to persist in Russia as well as in other emerging markets this year, Hyundai President Lee Won-hee said after the automaker released its earnings.


In the U.S., where a weak yen lets Japanese makers offer aggressive discounts, Hyundai's average sales incentive will stay at the 2014 level even with sales of new models such as the Sonata sedan and the Tucson sport utility vehicle, Lee said.


LOW EXPECTATIONS


Hyundai raised its year-end dividend for 2014 by over 50 percent to 3,000 won per share, and said it would continuously increase payouts in coming years.

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Earlier, Hyundai reported fourth-quarter net profit of 1.66 trillion won ($1.53 billion), compared with the 1.98 trillion won average estimate of 14 analysts polled by Thomson Reuters I/B/E/S.


"Market expectation has been lowered a lot. It's unlikely to get worse this year," said senior auto analyst Suh Sung-moon of Korea Investment & Securities. "Whether the Tucson is successful or not is key to reviving profitability this year."


Hyundai aims to lift sales by 1.8 percent this year to 5.05 million vehicles but should exceed that target, Lee said. In the fourth quarter, strong sales and a weaker won helped push up revenue by 8 percent to 23.57 trillion won, the automaker said.


"We expect competition to intensify in overseas markets, while makers of imported cars step up sales, boosted by tariff cuts and currency effects in the domestic market," Hyundai said in a statement.


As of Wednesday's close, Hyundai shares were down 25 percent over the past year, during which the property buy triggered a selloff, Thomson Reuters data showed.

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That makes Hyundai stock the worst performer among major automakers as well as the cheapest. Its 12-month forward price-to-earnings ratio is 5.5 compared with 8.3 for Toyota Motor Corp and 9.3 for Ford Motor Co, according to Thomson Reuters data.

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