Peel Hunt has downgraded its recommendation for Howden Joinery Group PLC (LON:HWDN) despite the fitted kitchen supplier beating expectations with its full-year results.
The City broker reckons the share price surge over the past few weeks means there is little to no money to be made on the stock at the moment.
As a result, it now sees the stock as a ‘hold’, down from its previous ‘buy’ recommendation, although it’s kept its 430p target price in place.
“The shares have bounced 15% in the last month or so as value investors have looked for good quality businesses that got left behind in 2016,” said analyst Gavin Jago.
“Operationally, it still remains a class act but we can’t get excited about the shares at the current levels.”
While Howden’s full-year profit before tax of £237mln bettered what the analyst had previously forecast, Jago was left frustrated with the proposed dividend pay-out.
“The full-year dividend has been increased by 8%, which we see as disappointing given the strong cash position and cover of [around] 2.8x,” the analyst said.
“The flip side to this is that the group has announced a further £80m share buyback for the next couple of years.”
In light of the weaker-than-expected dividend, Jago added he would be trimming his dividend estimates and upping the cash figures.
Shares added 4p, or 1%, to trade at 424p shortly before lunch.