Dividends – Important consideration in Investment Portfolios; A Look at Top Dividend stocks for 2020

  • Jan 09, 2020 AEDT
  • Team Kalkine
Dividends – Important consideration in Investment Portfolios; A Look at Top Dividend stocks for 2020

Investors choose to invest in fundamentally good stocks based upon good business models, higher product acceptance and when they are backed up by good management. Many investors look for businesses which have a healthy dividend payout ratio and have given major part of the earnings back to the investors. Dividends are primarily distributed when the business makes profit on a consistent basis. A business distributing generous dividends over the years implies that the company is generating decent profits over a long period of time. We would be looking at few companies which have a healthy annualize dividend yield ratio and a good business model.

Alumina Limited (ASX: AWC)

Alumina Limited is engaged in mining of bauxite, refining alumina and deals in alumina-based chemicals and aluminum smelting.

In the recent past, this business has delivered improved numbers, while the macro factors such as volatility in commodity prices, negative currency movements etc. might act as near-term challenges for the upcoming quarters.

Key operating highlights for Q3FY19 for the Period ended 30 September 2019: AWC declared its quarterly results wherein, the company reported adjusted EBITDA from Alcoa Alumina Segment at US$223 million as compared to US$369 million in Q2FY19 due to 17% decline in API. The result was partially offset by higher production, lower exchange rate and decrease maintenance expenses. Adjusted EBITDA Margin from Alcoa Alumina Segment came in at 19.6% as compared to 28.2% in Q2FY19. The business reported an adjusted EBITDA of US$134 million from Alcoa Bauxite Segment during Q3FY19, increasing from US$112 million in Q2FY19 driven by higher sales volumes for both internal and 3rd party segments followed by lower maintenance costs and improved performance at both MRN and CBG. The segment derived adjusted EBITDA margin of 38.2% as compared to 35.8% in Q2FY19. AWC posted AWAC Refining Business production of 3.2 mt and AWAC Mining Business production at 11.5 mbdt during the 3QFY19.

Q3FY19 Operational Highlights (Source: Company Reports)

Stock Update: The stock of AWC closed at $2.310, up 1.316% as on 09 January 2020. The stock is trading with a market capitalization of ~ 6.57 billion. The stock has generated positive returns of 0.44% and -1.72% during the last one month and three months, respectively. The stock has delivered an annualized dividend yield of 11.46%.

 

Bank of Queensland Limited (ASX: BOQ)

Bank of Queensland Limited offers banking, financials and related services across Australia. On 30 December 2019, the company reported change in director’s interest, wherein one of its directors named Bruce James Carter acquired 4,127 ordinary shares at a price consideration of $7.27 per share.

The company possesses sound balance sheet ratios. The Management highlighted that the bank is expected to remain ‘unquestionably strong’ in 2020. The Management also highlighted that the Board is likely to maintain the dividend payout ratio in coming years. Due to tepid macro conditions, the operating performance of the company remained challenging. On the valuation point, the stock is available at a price to earnings multiple of 9.78x on TTM basis, which is relatively cheaper than the peers.

FY19 Key Operational Highlights for the period ended 31 August 2019: BOQ declared its full-year results, wherein, the company reported statutory net profit after tax at $298 million, down 11% on y-o-y basis. Cash earnings after tax stood at $320 million, down 14% on y-o-y basis. Common Equity Tier1 ratio fell 27 bps during FY19 as compared to FY18 and stood at 9.04% as on June 30, 2019. During FY19 the company distributed 65 cents per share, down 14% on FY18.

FY19 Financial Highlights (Source: Company Reports)

Stock Update: The stock of BOQ closed at $7.310, up 0.689% on 9 January 2020. The stock has a market capitalization of $3.3 billion. At current market price, the stock has generated an annualized dividend yield of 8.95%. The stock is available at a price to earnings multiple ratio of 9.78x on trailing twelve-month basis.

Suncorp Group Limited (ASX: SUN)

Suncorp Group Limited operates in provision of banking, insurance, wealth and other financial products to the retail, corporate and commercial players. Recently, the company announced its completion of Capital Notes 3 offer wherein, the company is raising $389 million through the issue of 3,890,000 Capital Notes 3 at a price consideration of $100 each.

FY19 Financial Updates for the period ended 30 June 2019: SUN declared its FY19 full year results, wherein the company reported NPAT from ongoing functions at $1,197 million, depicting an increase of 1% over FY18. Segment-wise the insurance business in Australia went through several challenging environment and reported NPAT of $588 million, down by 13.7% on y-o-y basis. The banking and wealth segment stood marginally lower by 1.4% on y-o-y basis at $364 million while the New Zealand segment reported a robust growth of 81.5% on y-o-y basis at $245 million.

During FY19, the company reported full dividend of 78 cents as compared to 81 cents in FY18. The company reported a robust dividend payout ratio of 81% in FY19. During the year, the company reported a growth of 1.5% on y-o-y basis in its cash earnings at $1,115 million. The stock looks decent due to improved business prospects from improved margin outcome in commercial Insurance segment followed by strong growth through digital investment across at-call deposits.

Stock update: The stock of SUN is quoting at $13.19, up 1.306% as on 09 January 2020. At current market price, the stock has generated an annualized dividend yield of 5.38%. The stock is available at a price to earnings multiples ratio of 96.160x on TTM basis. The stock has generated negative return of 3.27% and 3.09% in the last three months and six months, respectively.

 

Westpac Banking Corporation (ASX: WBC)

Westpac Banking Corporation is engaged in marketing of banking and financial products.

FY19 Financial Highlights for the Period ended 30 September 2019: WBC declared its FY19 financial results, wherein the company reported net profit at $6,784 million, down 16% on y-o-y basis. Cash earnings during the year stood at $6,849 million, a decrease of 15% on y-o-y basis. Return on equity for FY19 came in at 10.8% down 225 basis points from FY18. The consumer segment reported cash earnings at $ 3,288 million, a de-growth of 4% on y-o-y basis, while Business and Westpac Institutional Bank segments reported cash earnings of $2,431 million and $1,014, representing a de-growth of 12% and 7% on y-o-y basis. On the other hand, New Zealand segment reported cash earnings of NZ$1,042 million, up 3% on y-o-y basis. The company reported common equity tier 1 ratio (APRA basis) at 10.7% as on 30 September 2019.

The above business is one of the leading groups across the banking segment and have strong balance sheet ratios. The stock is available at a P/E multiple of 12.490x on TTM basis. During 2HFY19, the business has declared a dividend of 80 cents per share. The business reported a dividend payout ratio of 79% in 2HFY19.

Stock Update: The stock of WBC closed at $24.47, down 0.285% as on 09 January 2020. At current market price, the stock is trading at a market capitalization of $88.63 billion. The stock has generated a dividend yield of 7.09% on an annualized basis. The stock has generated negative return of 14.44% and 12.42% in the last three-months and six-months, respectively.

Spark Infrastructure Group (ASX: SKI)

Spark Infrastructure Group is the owner of infrastructure for quality essential services as part of a diversified portfolio.

HY19 Operational Highlights for the period ended 30 June 2019: SKI announced its HY19 results, wherein the company reported total revenue at $573.7 million as compared to $566.7 million in HY2018. EBITDA during the period stood at $413.6 million, down 3.4% on y-o-y basis. The company reported higher operating costs at $166.1 million as compared to $143 million in previous corresponding period. The company reported customer growth of 1.5% from previous corresponding period. Net capital expenditure during HY19 stood at $221 million as compared to $211.1, a year ago.

The company has healthy financials and expected to deliver improved results during the next financial year.

Stock Update: The stock of SKI closed at $2.110, up 1.932% as on 09 January 2020. The stock has a market capitalization of $3.52 billion. At current market price the stock has generated an annualized dividend yield of 7.49%.


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