Investors in Calgro M3 will have to wait a few years before the fast growing housing company considers dividends, as it continues to expand aggressively.
Some investors expected Calgro, which listed a decade ago, to begin paying out in line with various property companies on the JSE. Regular income payouts suit many pension-fund investors who buy property and related stocks.
But Wikus Lategan, who became CEO in March 2017, said his shareholders were better positioned to be rewarded with capital growth instead of dividends from the company.
Calgro invested in a joint venture with real estate investment trust, SA Corporate Real Estate in 2017. It also made progress with a business that develops and runs the amenities for memorial parks.
"We want to build our three businesses so that they each contribute a third of our headline earnings by 2022," he said.
Lategan, Calgro’s former financial director and a restructuring specialist, said if one of the streams did not perform well, it could be mitigated by the other two businesses.
Calgro has been one of the best performing small-cap stocks on the JSE in recent years. The company, which has a market capitalisation of R1.78bn, saw its share price grow nearly 138% over the past five years, but it has lost about 31% year-to-date. Its pipeline has nevertheless grown substantially. The pipeline was R10bn in 2013, R17bn in 2014, R19bn in 2015, R27bn in 2016 and R28bn by 2017.
Keith McLachlan, a fund manager at AlphaWealth said Calgro M3 had been smart to reinvest and not pay dividends.
Calgro was compounding returns on top of a nearly 20% return on equity, he said.
"If a company can generate a 20% plus return on its equity, especially when averaging a growth rate of circa 20% year-on-year, why should they pay capital out as a dividend into investor bank accounts that earn circa 5% interest on that capital?" he said.
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