Small capped Vita Life Science has been paying consistent dividends for years
The company sells vitamins and supplement products including Herbs of Gold
Stockhead reached out to VLS’s managing director, Andrew O’Keefe
Small-capped healthcare stocks may sound like a poor dividend investment when you consider that most have not even reached revenue stage.
But when digging deeper into this ASX cohort, we found a stock that’s been paying dividends consistently for at least the last 10 years.
Vita Life Sciences (ASX:VLS), a $95m capped distributor of vitamins and supplement products, has been handing out consistent payouts to its shareholders as far back as 2014.
Vita Life Science’s historical dividend payments:
Source: Commsec
The company sell its own brands – Herbs of Gold and VitaHealth – to selected pharmacies and specialised health food channels all over the country, and in overseas markets including Malaysia, Singapore, Vietnam, Indonesia, and of course, China.
“We’re predominantly a vitamins and supplements business,” explained Vita Life Science’s managing director, Andrew O’Keefe.
“We are the brand owners. We utilise third party manufacturers, but for all intents and purposes, we sell and distribute our own vitamins and supplements across Australia and several Southeast Asian markets,” he told Stockhead.
O’Keefe says that Herbs of Gold is predominantly known within the Australian market, whereas VitaHealth is predominantly sold in Southeast Asia.
“We formulate those products ourselves. We have our own team of internal naturopaths, nutritionists and dietitians that formulate our products in conjunction with our manufacturing partners.”
Premium end of market
Sales are expected to hit around $73m-$74m in FY23, up from $66.9m in the previous year, with official numbers to be released soon.
On the back of that revenue, VLS expects bottom line profit to hit the $11.3m-11.8m range, up from $10.7m in FY22.
The company said that it saw sales growth during the year in all its major markets: Australia, Malaysia, as well as its exports into China.
“It’s proven now and over time that even in the most difficult financial economies, consumers are still looking after their health and wellbeing,” said O’Keefe.
“Covid proved that. People are looking for alternative sources to maintain their health and make sure their dietary requirements are where they need to be – basically to be fit and healthy.
“So, it’s really an industry that holds up in any economic situation,” he added.
Each of Vita’s two products has different formulations, but essentially the company has positioned itself as a high-end, natural vitamins and supplements provider.
“Our positioning on both brands is we have high-strength formulations.
“So we’re very much at the premium end of the product proposition, and that’s why our margins and our pricing reflects that,” said O’Keefe.
Overseas expansion
In Australia, the products are currently sold in more than 2,000 selected health food and pharmacies like Priceline, Blooms, and Terry White.
O’Keefe admits that when he joined Vita in 2017, he felt the company’s channel strategy was too narrow, as it was just an exclusive brand for the health food channel.
“So we deployed a deliberate strategy to expand our business into pharmacies.
“Now, we’ve got a very clear channel strategy, and that we’re very selective around how and who we partner with. And that gives us a point of difference with some of our competitors.
“We’ve also been in the market for a long time, particularly here in Australia for over 30 years now with the Herbs of Gold brand, so there’s been a long association and relationship with consumers that are familiar with our brands.”
In terms of expansion, O’Keefe believes there’s an opportunity to grow in some of the countries it’s already selling in, such as China and Vietnam.
In China, the company partners with a distributor which handles sales across all the major e-commerce platforms in the country.
But while China is an obvious big target, it’s Vietnam that O’Keefe says he will focus his attention on outside of Australia.
“Vietnam is an interesting market, and we feel that that it has some good growth prospects for us. A lot of companies are looking at Vietnam as the next new emerging market.
“The economy is doing reasonably well, with reasonably high level of middle class.”
A healthy balance sheet
Given all this growth potential that lays ahead, O’Keefe believes the market may have overlooked the stock.
The company has a healthy balance sheet, with a solid cash position; it carries no debt, and has not raised any funds since listing in 2007.
“We’ve got a business that has really good strong growth prospects.
“We’ve got a consumer that has an appetite to continue to look after themselves in a healthy and meaningful way.
“And we’ve got a company here that has proven itself to have good strong financial disciplines and deliver returns over the long term,” said O’Keefe.
The VLS share price has climbed 20% in the past six months.
Vita Life Science share price today:
Other ASX stocks in this space
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The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
The post Healthy balance sheet with no debt, this overlooked ASX health stock has been paying dividends for years appeared first on Stockhead.
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