Dividend Stories - REA, News Corp and Sigma Healthcare

Dividend Stories - REA, News Corp and Sigma Healthcare

Companies pay dividends as a fraction of their profits in a particular period, rewarding the stakeholders as well as encouraging them to keep investing in the business. A promising dividend stock can be identified from whether it is operating in a strong sector, has fiscal strength and comparable P/E ratio, nature of dividend payments (rising or falling), predictable and sustainable cashflow as well as confidence of company insiders in the stock. 

Nevertheless, dividend stocks are a reliable way to build long-term wealth and a beneficial addition to one’s portfolio. Dividends matter a lot to the investors. Recently, Australia-based REA Group announced an interim dividend of $ 0.55 while News Corp would be paying a dividend of $ 0.100 on its two class of securities. On the other hand, Sigma Healthcare has announced that it would not be paying a fully franked final dividend in respect of FY20 due to challenges faced in the recent past.

REA Group Limited (ASX:REA)

Multinational digital advertising company, REA Group specialises in property and operates leading residential, commercial and share property websites in Australia. Besides, the Group also runs leading portals in South East Asia including Malaysia, Hong Kong and Indonesia and prominent portals in Singapore, China as well as Thailand. Australian mortgage broking franchise group, Smartline Home Loans Pty Ltd and Hometrack Australia Pty Ltd, a well-known provider of data property services also fall under the ownership of REA.

Half-Year 2019 Results: In the recent half year ended 31 December 2019, the Group has delivered a resilient performance amid continued challenging market conditions, with its core operations registering revenue of $ 440.3 million and EBITDA of $ 272.1 million. REA Group’s operating expenses reduced by 4% in the period to $ 168.2 million, on the back of strong  cost management and efficiencies gained from an organisational realignment.

Source: Company’s Report

The additional positive impact of realignment has been an increase in the speed and efficiency of product delivery across the business, while it would also allow for continued investment in innovation and growth initiatives.

The challenging market conditions included national residential listings falling by 14%, which included listing declines of 17% in Sydney and 16% in Melbourne. In addition, new project commencements fell by 30% over the concerned period.

As for the dividends, the Group paid an ordinary fully paid dividend of $ 0.55 (Record Date: 10 March 2020; Payment Date: 24 March 2020) for the six months to 31 December 2019.

Outlook: The Australian residential market has shown signs of a market recovery, led by Sydney and Melbourne. Thus, the Group’s full-year revenue growth would be dependent upon improved listing conditions in the second half of 2020. Regardless, REA would continue to invest in growth initiatives, while planned efficiency gains and strong cost management will result in a reduction in operating costs year-on-year. Thus, revenue growth is still expected to exceed the rate of cost growth for the full-year.

Stock Information: With a market capitalisation of around $ 14.93 billion and ~ 131.71 million shares outstanding, the REA stock settled the day’s trade higher at $ 116.900, moving up 3.11% by AUD 3.520, on 7 February 2020 with ~ 476,614 shares traded.

The REA stock has generated impressive positive returns of 22.07% in the last six months and 7.72% year-to-date.

News Corp (ASX: NWS)

News Corp, headquartered in New York, United States, with operations across Australia and the UK, is a diversified media and information services company, actively engaged in the development and distribution of authoritative and engaging content as well as other products & services.

Second Quarter 2020 Highlights: On 6 February 2020, the company released its key metrics for the fiscal 2020 second quarter (three months to 31 December 2019), posting revenues of ~$ 2.48 billion, depicting a 6% decline relative to $ 2.63 billion in the prior corresponding period (pcp). However, the overall decrease somewhat balanced by continued growth delivered by circulation and subscription revenues from the News and Information Services segment.

Consequently, net income was recorded at $ 103 million as compared to $ 119 million in the pcp. The total segment EBITDA amounted to $ 355 million relative to $ 370 million in the pcp. The company witnessed growth across most of its news businesses and a rise in profits from Move, the operator of realtor.com®.

A weak economic situation in Australia, uncharacteristic softness in book publishing as well as foreign exchange fluctuations did impact the financial results for this period. Going forth, the company expects to see improvements in the second half, on the back of real estate market recovery, Dow Jones benefiting from new content licensing arrangements and more digital subscribers, and HarperCollins capitalising on an exciting slate of new releases.

For the quarter,  the Board of News Corp announced a dividend of $ 0.100 on its CLASS B VOTING COMMON STOCK-CDI 1:1 and a dividend of $ 0.100 on its CLASS A NON-VOTING COMMON STOCK-CDI 1:1 with the Record Date being 11 March 2020 and Payment Date being 15 April 2020 for both the distributions.

Stock Information: With a market capitalisation of around $ 12.45 billion and around 588.45 million shares outstanding, the NWS stock settled the market trading on 7 February 2020 at $ 21.820, zoomed up 3.17% with ~ 479,180 shares traded. NWS has delivered positive returns of 10.33% in the last six months and 3.12% in the last three months.  

Sigma Healthcare Limited (ASX: SIG)

Australia-based Sigma Healthcare is engaged in the wholesale and distribution of pharmaceutical products including over-the-counter (OTC), prescription, and generic drugs across the country.

Trading and Dividend Update: On 7 February 2020, the company released an update informing the market that it remains on track to deliver FY20 underlying EBITDA guidance of approximately $ 46-47 million ($ 57-58 million including the benefit from the adoption of the new accounting standard AASB 16 Leases).

However, the company had to incur some one-off costs related to an ongoing transformation of its business that has resulted in insufficient franking credits. As a consequence, the fully franked final dividend in respect of FY20 has been flagged off for now. As the company progresses through FY21, the franking credit position will be reviewed progressively.

 The company also announced that its further guidance for FY21 would be provided at the FY20 results released, currently scheduled for 25 March 2020.

Stock Information: With a market capitalisation of $ 625.02 million and ~ 1.06 billion shares outstanding, the SIG stock settled the trading on 7 February 2020, at $ 0.595, edging up 0.847% with ~ 943,039 shares traded. Besides, SIG has delivered positive returns of 2.61% year-to-date and 1.72% in the last one month.

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