Invest in this ASX 200 Stock for an 11% Gain and 4%+ Dividend Yield

If you're on the hunt for a blend of market-beating gains and an attractive dividend yield, it might be time to consider the ASX 200 stock highlighted in this article. Analysts at Bell Potter believe this stock is undervalued at its current levels and is poised to deliver robust returns for investors over the next 12 months.


Image Credit: Pexels

Which ASX 200 Stock?

The stock in focus is Elders Ltd (ASX: ELD), a leading agribusiness company. Bell Potter notes that Elders’ shares have underperformed recently due to skepticism about its ability to meet its guidance. However, the broker believes these doubts are misplaced and that Elders is well-positioned to achieve its targets.

Recent Performance and Analyst Outlook

Bell Potter highlighted that Elders' share price has stagnated following the release of its 1H24 results, where the FY24 earnings before interest and taxes (EBIT) guidance of $120-140 million was reiterated. This implies a 2H24 EBIT of $82-102 million, compared to $88.0 million in 2H23 and $38.5 million in 1H24. The broker is confident that a combination of acquisitions, business investments, and stronger year-over-year trends in livestock will support their FY24 forecasts and the guidance range.


In light of this, Bell Potter’s analysts have reaffirmed their buy rating and $9.30 price target on Elders. With the latest Elders share price at $8.36, this suggests a potential upside of 11.2% for investors over the next year.

Dividend Yield and Potential Returns

Bell Potter is forecasting partially franked dividends of 36 cents per share in FY 2024 and 41 cents per share in FY 2025. This translates to dividend yields of 4.3% and 4.9%, respectively. Assuming a 4.6% dividend yield over the next 12 months (combining the FY 2024 final dividend and the FY 2025 interim dividend), the total potential return could reach 15.8%.


To illustrate, a $10,000 investment in Elders today could potentially grow to $11,580 over the next year, considering both the share price appreciation and the dividends.

Valuation and Growth Potential

Bell Potter emphasizes that Elders' shares are currently trading at a notable discount to their historical average multiples, just as its earnings growth profile is beginning to recover. The broker notes:

"Our Buy rating is unchanged. At a high level, we see ELD trading at 7.7-7.9x Through-The-Cycle (TTC) EBITDA, which we estimate at $270-280 million, reflecting YTD business investment ($68 million in 1H24 + $51 million on Knight Frank TAS), a discount to its historical average of 8.5x. Improving livestock turnover, the benefits of recent business investments, and a stabilization in agricultural input prices support a recovering earnings growth profile in 2H24e-1H25e."

Strategic Investments and Market Position

Elders has been proactive in strengthening its market position through strategic acquisitions and investments. The recent acquisition of Knight Frank Tasmania, along with significant investments in its core business, underscores Elders’ commitment to growth and enhancing shareholder value. The company’s focus on improving livestock turnover and capitalizing on favorable trends in the agricultural sector further bolsters its growth outlook.

Why Elders Is a Strong Pick for Investors

Elders Ltd offers a compelling investment opportunity for several reasons:


1. Attractive Valuation: Trading at a discount to its historical average multiples, Elders presents a value opportunity with significant upside potential.

2. Solid Dividend Yield: With forecasted dividend yields of 4.3% and 4.9% for FY 2024 and FY 2025, respectively, Elders provides a steady income stream for investors.

3. Growth Potential: Strategic investments and a recovering earnings growth profile position Elders for substantial gains in the near term.

4. Analyst Confidence: Bell Potter’s reaffirmed buy rating and price target highlight the broker's confidence in Elders' ability to deliver strong returns.

Elders’ Market Position and Future Outlook

Elders Ltd has a strong presence in the agribusiness sector, providing a range of services that support Australian agriculture. From farm supplies and livestock services to real estate and financial services, Elders has a diversified business model that mitigates risk and capitalizes on various revenue streams.


The company's recent investments and acquisitions are expected to enhance its market position and drive future growth. By focusing on improving operational efficiencies and leveraging market opportunities, Elders is well-positioned to meet its earnings guidance and deliver value to shareholders.


For income investors and those seeking capital appreciation, Elders Ltd stands out as a top pick. With a combination of attractive valuation, solid dividend yields, and strong growth potential, Elders offers a balanced investment opportunity. The confidence expressed by Bell Potter further reinforces the stock's potential to deliver robust returns.


Investing in Elders could prove to be a wise decision, with the potential for significant upside and a steady income stream. As the company continues to execute its strategic initiatives and capitalize on market opportunities, shareholders can look forward to sustained growth and value creation.
Location: Australia

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