Shares in Morrisons (LSE: MRW) (NASDAQOTH: MRWSY.US) rose by more than 4.5% in early trade, despite announcing a 10% fall in first-half profits.
The supermarket confirmed that underlying profit slipped to £401 for H1, against £445m at half-time in 2012/13, with earnings per share down 2% to 12.86p from 13.09p last year. Turnover remained stable at £8.9bn.
However, the market was cheered by other revelations — one such being the interim dividend being raised by double digits despite the decline in profits, up 10% to 3.84p (2012/13: 3.49p) to put the shares on a consensus forecast yield of 4.4%.
This was supported by a new dividend policy, as the board’s previous commitment to a three-year minimum annual dividend increase of 10% is in its final year. From 2014/15 onwards, management confirmed “the Board will maintain a progressive dividend policy targeting cover, over the medium term, of around two times underlying earnings”.
Elsewhere, despite a slight drop in total store sales, up 0.8% against a rise of 1.3% in 2012/13, the half saw seven new supermarkets opened, and plans to expand the current number of 33 operational convenience stores to 100 by the end of the year are on track — as is the launch of its online proposition, due for launch in the New Year, supported through its service agreement with Ocado.
In some quarters, Morrisons has been given the title of “the super-investor’s supermarket”, after Neil Woodford famously sold his Tesco shares to Warren Buffett last year and backed the Bradford-based company instead. Only time will tell who made the right decision there, but Woodford and fellow shareholders will be pleased with Morrisons’ gains today.
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> Sam does not own shares in any company mentioned. The Motley Fool owns shares in Tesco and has recommended shares in Morrisons.
