Is it a Carnage? Dividend Dynasty for Income Stocks and a Peek into Present Dividend Stalwarts

Is it a Carnage? Dividend Dynasty for Income Stocks and a Peek into Present Dividend Stalwarts

Summary

  • Many dividend-paying companies during COVID-19 have either reduced, deferred, or cancelled their dividend.
  • In the banking sector, National Australia Bank reduced its dividend by 64%, Westpac decided against paying a dividend in June 2020, and Australia and New Zealand bank cancelled its interim dividend.
  • However, many companies declared a dividend to its shareholders despite the COVID-19 crisis:
  • TechnolgyOne provided an interim dividend of 3.47 cents per share.
  • Woolworths Group confirmed an interim dividend of 46 cents per share.
  • Dicker Data Limited declared Q1 FY2020 dividend of 7.5 cents per share.

The year 2020 has been like a roller coaster ride for Australia, starting with the devastating impact of bushfire spilling over to 2020 to the coronavirus pandemic that shook the entire world. The bushfire in Australia brought the country in the spotlight, and the global pandemic brought it in the eye of the storm.

Many businesses got impacted significantly. Most companies are struggling to survive, while many dividend-paying players have either delayed or cancelled their dividends due to the above reasons. However, the government is taking steps to bring back people to work and businesses to resume operations. Things are not yet settled though. However, this is the only way to bring Aussies and the economy back on their feet.

Prime Minister, in his recent release, highlighted that COVID-19 was the biggest economic shock in Australia’s history as the country lost $50 billion in just three months.

Many conservative investors prefer income stocks that provide regular & continuous income, generally through a dividend and have low exposure to risk. However, the outbreak came as a shock to these investors because as these certain payments became uncertain due the economic turmoil.

Some of these companies whose dividend were impacted by COVID-19 outbreak include:

  • National Australia Bank (ASX:NAB)
  • Consistently provided its shareholders with dividend since 2016.
  • In 1H FY2020 ended 31 March 2020, NAB reduced its dividend by 64% to 30 cents per shares.

 

  • Westpac Banking Corporation (ASX:WBC)
  • Consistently provided its shareholders with dividend since 2016.
  • WBC’s board decided against paying the interim dividend in June.

 

  • Australia and New Zealand Banking Group Limited (ASX:ANZ)
  • Consistently provided its shareholders with dividend since 2016.
  • ANZ cancelled its interim dividend payment until there’s further clarity concerning the economic outlook.

 

  • Sydney Airport (ASX:SYD)
  • Consistently provided its shareholders with dividend since 2016.
  • Because of the importance of liquidity, the present COVID-19 impact and the uncertain outlook made the Boards of Sydney Airport Limited and Sydney Airport Trust 1 agree on a point not to declare a dividend for the half-year period ended 30 June 2020.

Also Read: When Banks’ Dividends Are Under the Knife, Are Players Like Telstra Emerging as Winner?

While many income stocks have been impacted during this period, there are several companies which have provided a dividend amid COVID-19. These companies have a positive outlook which indicates that they have that potential to provide dividend in the future as well.

Let us look at some of the dividend stalwarts in the present times:

TechnolgyOne  Limited (ASX:TNE)

TechnolgyOne Limited has provided its shareholders with dividend since 2016. In its announcement related to 1H FY2020 results for the half-year ended 31 March 2020, TNE declared a dividend of 3.47 cents per share.

  • The Company reported a 7% growth in its revenue to $ 138.4 million.
  • Profit after tax went up by 6% to $ 25.9 million.
  • SaaS Annual Recurring Revenue increased by 33% to $110.2 million.
  • Cash and Cash Equivalents by the period ended 31 March was $84 million, up 23% as compared to the previous corresponding period.

Further, the Company expects that in FY2024, its total annual recurring revenues would increase to $500+ million. It also anticipates continuing growth in the UK market, which is three times the size of the Australian market.

Woolworths Group (ASX:WOW)

Woolworths Group is amongst the leading retail groups in Australia and New Zealand. It supports well-known brands like Woolworths, Big W, BWS, Dan Murphy’s and Countdown.

Woolworths Group has provided its shareholders with a dividend since 2016. In 1H FY2020 for the period ended 31 December 2019, the Company declared an interim dividend of 46 cents per share.

  • Sales generated from continuing operations increased 6% to $32,410 million.
  • Group online sales soared 31.6% to $1,650 million.
  • NPAT from the continuing operations increased by $979 million.

During Q3FY2020, the Company reported an increase in Group sales from continuing operations by 10% to $16.5 billion. The Group’s online sales went up by 34% to $817 million.

The Company noted impressive BIG W sales growth but a material adverse change in the mix because of COVID-19.

Some key points to note about Woolworths:

  • Being the largest grocer in Australia, the Company has always maintained its reputation for the safety of its team and customers.
  • It takes all possible steps to meet the demand of the foodstuff and everyday needs of its customers.
  • WOW reported strong sales in April 2020 but was offset by the high incremental operating cost.
  • Overall, every people need essential items for their day to day activities which WOW provides to its customers. Thus, one may say that the Company can give a dividend to its shareholders.

Dicker Data Limited (ASX:DDR)

Dicker Data Limited is the country’s top locally owned & operated distributor of ICT hardware and software, IoT solutions, and cloud services for reseller partners.

The Company over the past 40 years is supporting its Australian partners in designing, configuring as well as applying solutions for their clients and to effectively novate their business’ through technological change.

The Company has consistently provided a dividend to its shareholders since 2016. In Q1 FY2020, the Company reported 19.9% growth in its revenue to $463.9 million. For the period ended 31 March 2020, the Company announced a dividend of $ 7.5 cents per share.

The proposed fully franked interim dividends for FY2020 would be 7.5 cents per share. Thus, the total proposed dividend to be paid by the Company in the FY2020 would be 35.5 cents per share, up 31.5% on pcp.

Q1 FY2020 highlights:

  • Net profit before tax increased by 36.3% to $18.4 million.
  • The Company paid out the $40 million Corporate Bond on 26 March 2020.

The Company during the quarter ended 31 March 2020 had its highest-ever revenue month in March 2020 because of considerable mobilisation to remote working solutions.

The Company also noted that the Company did not experience any material impact on its sales pipeline. The board based on the strong start in Q1 and the present business position stated that the proposed interim dividend would be on the basis that there is no overall downturn faced in the second half of 2020.

Progress towards the Company’s long-term Objective:

Recently on 8 May 2020, the Company announced the completion of $50 million Placement via the issue of 7.5 million new shares at $6.70 per share. Further, the Company announced that the eligible shareholders would have an opportunity to acquire $30,000 in new shares via SPP.

The proceeds of the equity raising would support the Company in achieving its long-term objectives and provide balance sheet flexibility.

The new shares issued under placement started trading from 13 May 2020.

Stock Information

NOTE: $ represents Australian Dollars unless stated otherwise.

 


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There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.

Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.

As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.

CLICK HERE FOR YOUR FREE REPORT!
   
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