- While a stock offering a high dividend yield looks attractive, one must look beyond it and also consider the company’s performance and the share price movement.
- Coal mining companies Yancoal Australia and Whitehaven Coal, who despite falling production of saleable coal, have impressive annual dividend yields and a strong cash position backed by debt facility to augment their business operations.
- Centuria Office REIT operating investment trust is well-positioned to provide strong returns in future with high-quality office assets under its national portfolio.
- The three companies are expected to witness growth once the economy picks up, and business activities and trade are up and running.
Despite the COVID-19 pandemic impacting stock exchanges across the globe and several companies struggling to make ends meet, some companies have showcased strong dividend yields, acting as a saviour for investors who want to play safe as the pandemic blues continue. A high dividend yield draws an investor’s attention. However, it might not be enough to look at the yield alone, and it is prudent to consider how the Company is performing and the movement in the share price.
With the Australian economy on the path to recovery, companies with high dividend yield act as a safe bait for long-term investments.
We have identified three ASX dividend stocks that, at present, are providing relatively high dividend yields. Let’s discuss in length their performance amid the pandemic.
Yancoal Australia Ltd (ASX:YAL)
Yancoal Australia produces and develops coal from open cut and underground coal mines in New South Wales, Queensland, and Western Australia. The Company also has an approximately 50% stake in the Middlemount JV.
As on 15 June 2020, Yancoal Australia has an annual dividend yield of 14.41%. The stock last traded at $2.160, down 1.37% from its previous close.
On 1 June 2020, the Company announced two significant developments:
- First, Yancoal successfully closed a refinancing of an existing syndicated bank guarantee facility set for expiration on 1 September 2020. The $975 million replacement bank guarantee facility has a three-year maturity and is secured against the assets of certain subsidiaries of Yancoal Australia.
- Second, Yancoal appointed Kevin Ning SU as Chief Financial Officer (CFO), effective from 1 June 2020. Mr Ning Su has been with the Company since June 2014 as General Manager.
The Company, which showcased a strong balance sheet with cash and cash equivalent of $962 million as on 31 December 2019, had announced a dividend payment of 21.21 cents per share on 29 April 2020.
The coal production in the first quarter of 2020 was not that promising with increased production recorded only at its Moolerben Coal Joint Venture. The Company in March acquired another 10% stake in Moolerben for $300 million from Sojitz Corporation to increase its stake from 85% to 95%. The strategic acquisition has increased the Company’s 2020 attributable coal production from 36MT to 38MT.
Coal prices are likely to be driven by international markets. YAL is uncertain about its future saleable price and how it will affect the top-line and bottom-line of the Company. During the first quarter of 2020, Yancoal renewed several annual contracts with a stable sales position with Asian end-users. The Company has continued its operation during the pandemic to meet its customer requirements.
Whitehaven Coal Limited (ASX:WHC)
Whitehaven Coal Limited produces premium-quality coal through Open Cut Operations and Underground Operations segments in New South Wales in Australia. The Company serves internationally at Japan, Taiwan, India, Korea, China, Chile, Malaysia, Vietnam, Noumea, Indonesia, Australia etc.
As on 15 June 2020, Whitehaven has an annual dividend yield of 8.79%. The stock last traded at $1.575, down 4.545% from its previous close.
The Company published its first-quarter 2020 report with an 8% increased ROM coal production and 15% decreased saleable coal production as compared to the previous corresponding period. The Company’s March quarter sales were down by 22% as compared to the pcp. The decreased sales were due to staffing shortages, dust events at Maules Creek in the quarter ended December 2019 and the 8-week Narrabri longwall change-out. The Company also announced the completion of its $1 billion senior bank debt facility loan with maturity in July 2023.
Volatile pricing of hard coking coal affected the steel price. With international borders closed and key metallurgical markets of the Company in North-East Asia announcing steel production cuts, the sales of the Company are expected to hit hard for the quarter of June 2020. The Company expects demand for its high-quality thermal coal to remain strong amongst its end-users. The Company is still optimistic about its FY2020 guidance and has kept it unchanged with ROM Coal production in the range of 20.00MT-22.00MT and managed coal sales at 17.5MT – 18.5MT.
Centuria Office REIT (ASX:COF)
Centuria Office REIT operates a property investment trust offering investment opportunities in the commercial property space. The Company’s portfolio includes high-quality office assets.
As on 15 June 2020, Centuria has an annual dividend yield of 9.15%. The stock last traded at $1.930, down 0.258% from its previous close.
On 19 May 2020, the Company announced a securing an additional 7-year debt facility from Credit Agricole strengthening its balance sheet with more liquidity in hand as undrawn debt rose to $131.5 million. The weighted average debt maturity rose to 3.7 years as at April 2020 from 3.4 years.
The Company also boasts of a national portfolio of 23 high-quality office assets with 99% of it occupied with a WALE of 4.9 years. More than 60% of portfolio leases will be expiring at or beyond 30 June 2024.
On 20 March 2020, COF announced a quarterly distribution of 4.45 cents per unit.
Centuria has withdrawn its FY20 FFO guidance as COVID-19 pandemic continues to impact its business operations. Despite uncertainties, the Company intends to pay a distribution of 17.8 cents per unit during FY20 as the Company is well-positioned with strong capital in hand and quality office portfolio that will help in generating revenues from various sources.
Disclaimer: All the currencies mentioned are in Australian Dollars unless specified