Homeloans paying dividends

Homeloans Limited will pay a large percentage of its second-half profit as dividend and management aims to maintain a high payout ratio.

The niche lender and mortgage manager reported a statutory net profit of $7.2 million in the year to June 2009, and a normalised net profit of $8.4 million.

The final dividend of 5.5 cents and the full year dividend of seven cents represents a payout ratio of 84 per cent.

Homeloans manages a mortgage book of $660 million and, like a lot of niche lenders, reported lower levels of new business as demand migrated to the major banks.

The firm's outlook may improve, with more investment in distribution and the lender finally on the panel of Mortgage Choice, one of the largest aggregators.

National Australia Bank will replace Challenger as the minority stakeholder (with around 40 per cent) in Homeloans, given the purchase by NAB of the mortgage business of Challenger (and subject to a vote by shareholders in Homeloans).

Homeloans still has not found a use for the $40 million investment from Challenger made 18 months ago.

Tim Holmes, executive chairman, said there were a lot of small mortgage entities for sale and the firm had gotten close in negotiations in some case. But he said vendors of privately owned businesses held unrealistic views over their value.