Steady dividend growth reflects IDI's robust model
Steady dividend growth reflects IDI's robust modelLATEST
IDI declared an interim dividend of €2.5 per share for FY-24, representing 90% of the 2023 ordinary dividend. This announcement further illustrates IDI’s attractiveness as a yielding stock, offering shareholders remarkable visibility and resilience, irrespective of the economic environment. IDI is thereby reaffirming the strength of its flexible investment approach and rigorous capital allocation discipline.
FACT
IDI has announced an interim dividend of €2.5 per share for FY 2024, payable on 3 December 2024.
This interim dividend represents 90% of the €2.75 ordinary dividend paid for FY 2023, representing 3% of IDI’s NAV distributed per annum.
IDI’s investment capacity in Q3 24 was €300m.
ANALYSIS
A reliable yield play through cycles
IDI announced an interim dividend of €2.5 per share for the 2024 financial year, representing 90% of the ordinary dividend paid for FY-2023. This move further illustrates the resilience and attractiveness of its business model, cementing IDI’s position as a long-term yield stock. Ever since its IPO, IDI has offered its shareholders an average annual return of 15.87% (dividends reinvested).
The company’s return is all the more noteworthy in the context of a quieter 2024 for IDI, as discussed in our note Q3-24: Navigating 2024 with a thoughtful investment approach. After two outstanding years (36 deals), there has been a slowdown in the pace of deals, with only 3 completed to date. Consequently, investment income has declined from €84.7m in 9M-23 to €14.8m in 9M-24, and results for the year are expected to reflect this slowdown.
Despite these headwinds, IDI is staying firmly in control as evidenced by its resilience during the COVID crisis, when it distributed a €1.50 dividend in 2020, yielding 5% compared to the 3.1% average among peers. This track record reinforces confidence in IDI’s ability to maintain payouts even in challenging environments.
The bottom line is that IDI prioritises shareholder returns, in all market conditions. The early December payment of the interim dividend is also a timely benefit for shareholders, particularly in light of potential fiscal tightening in France.
An attractive business model
IDI’s success is underpinned by its unique and flexible investment approach, which allows the company to optimise exits at the right time. This strategy has consistently delivered strong performance, with an average IRR of 27.6% on disposals over the past decade. Unlike many of its peers (Eurazeo, Wendel, GBL), IDI maintains a net cash position, boasting €300m in investment capacity as of Q3-24, while others carry debt at the holding level.
While 2024 promises to be a benign year, we anticipate a gradual narrowing of valuation gaps in the private equity sphere, paving the way for an active investment phase for IDI. With the necessary resources and expertise, IDI is well-equipped to reinvest its cash into high-potential assets.
As highlighted in our Q3-24 note, IDI’s ability to uncover strategic opportunities is exemplified by its recent acquisition of TTK. Specialising in leak detection for critical environments such as data centres, TTK aligns with the EU’s priorities for improving water infrastructure, showcasing IDI’s knack for tapping into future-focused sectors.
Despite the reduction in its discount to NAV to 26% (below its peers), we continue to regard IDI as an excellent choice for investors seeking yield and resilience.
IMPACT
We are revising our model to reflect lower net profit expectations for IDI in 2024 due to the slowdown in deal activity. However, the announcement of the interim dividend reinforces our positive outlook on the stock, underpinned by its robust business model and commitment to shareholder returns.
Groupe IDI activity is divided in two areas: through its subsidiaries, EURIDI and Marco Polo Investissements, Co. is engaged in management buy-out/buy-in and growth capital investments in French small-mid caps valued between Euro7,000,000 and Euro75,000,000 also, through its subsidiary, IDI Mezzanine, is engaged in mezzanine financing. Also Co. is active in the purchase of secondary market portfolio.
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