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FY results: where will the Dunelm share price go next?

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Dunelm (LSE: DNLM) shareholders have done well during the pandemic — the share price has climbed 50% over the past two years. But have the results lived up to the hype?

Full-year figures for the homewares retailer were revealed Wednesday. And they’re pretty much up across the board. Total sales grew by 26%, with digital sales accounting for 46%. That’s a considerably bigger slice than the equivalent 27% a year previously.

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Pre-tax profit is up 45%. And at the bottom line, diluted EPS gained 47% to reach 62.9p. On the Dunelm share price at market close Tuesday, that represents a trailing P/E multiple of 20.

Dividend back on track

The only real negative is a 38% drop in free cash flow. But the company did end the year with net cash of £128.8m. With all this cash sloshing around, what’s happening with the dividend? There’s 35p per share for the full year, providing a modest yield of 2.7%.

That represents a strong progression from two years ago, when the dividend reached 28p. There was nothing paid in 2020. And on that subject, Dunelm says that “noting that no dividends were paid to shareholders in respect of FY20, the Board has declared a special dividend of 65p.”

So losing out on the pandemic year’s dividend isn’t necessarily bad for income investors. Not if they eventually pick up a significantly bigger helping of cash to compensate for the delay.

Dunelm share price future?

The Dunelm share price has gone off the boil in recent months. So what will this set of figures do for the retailer? I guess that depends on whether the market considers the current P/E to represent good value. Oh, and whether investors think Dunelm’s sales growth trajectory will continue.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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