Stock Valuation & Dividend Analysis: Tabcorp Holdings Ltd (TAH)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
Consumer Cyclical – Travel & Leisure – Gambling AUD4.80
@ 03 Sep 2018
COMPANY PROFILE Tabcorp Holdings Ltd is an online gaming company. The firm conducts wagering activities under the TAB brand in Australia. It also runs TV and radio operations, under the Sky Racing banner, focusing on the racing industry.

Tabcorp conducts wagering activities under the TAB brand in Victoria and New South Wales through a network of agencies, hotels and clubs, as well as via the Internet, mobile devices, and pay TV. Following the merger with Tatts, the company’s retail wagering reach has expanded to Queensland, South Australia, Tasmania, and the Northern Territory. Through the acquisition of Tatts, it now operates regulated lotteries in all of Australia except Western Australia. It also runs TV and radio operations, under the Sky Racing banner, specialising in the racing industry. In addition, Tabcorp Gaming Solutions provides services to electronic gaming machine venues, while the Keno business offers electronic lotteries to patrons in licensed venues in Victoria, Queensland, and New South Wales.

Stock Code TAH
Stock Valuation and Dividend Analysis Below

Tabcorp Dividend Yield

For stocks that has a history of paying meaningful dividends, the stock price is often dependent on how much dividend the company pays.
At the price of AUD4.80 as at 03 Sep 2018, Tabcorp Holdings Ltd is trading at a Dividend Yield of 4.4%. This is a 3.7% premium to its historical average Dividend Yield of 4.6%.  (Note: The lower/higher the dividend yield, the more expensive/cheaper the stock is.)
Is the stock overvalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
We should not only be concerned about the amount of dividends, we should determine if the dividends paid out by the company are sustainable. One way to do that is to compare dividends paid out to the cash flows that the company is generating.
The company usually pays less dividends than its free cash flow, which is good.

Tabcorp Dividend vs. Free Cash Flow

Source of Data: Company description, historical financial statements data and price data are from or Estimates are from – Thomson Reuters.
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