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Looking at long-term returns - Spotlight on Financial, Materials & Industrials

  • April 20, 2020 02:04 PM AEST
  • Team Kalkine
Looking at long-term returns - Spotlight on Financial, Materials & Industrials

Long-term investments are any assets that a company/individual hold for more than a year and the benefits associated with this approach may be found in the relationship between volatility and time. Investments held for longer periods tend to overcome market volatility, particularly in the equity markets. The longer you invest, the more likely you will be able to weather low market periods, avoid transaction costs that occur from active trading, and take advantage of overall growth and productivity of the economy in the long run.

Gold MTF non-AMP

Following are some of the ASX-listed stocks from different sectors that can fetch long-term returns, as these are old and well-established companies in their respective sectors with a record of consistently good financial performance and payment of dividends.

Disclaimer- Please note that the below information should be regarded as presentation of facts, not recommendation.

Financials Sector

  • Commonwealth Bank of Australia (ASX: CBA)

Commonwealth Bank of Australia is a multinational bank with operations spanning across Asia, US, UK and New Zealand. Recently, S&P Global Ratings (S&P) revised CBA's long-term and short-term ratings to AA- and A-1+, respectively, while the bank’s outlook has been revised from stable to negative to reflect a substantial deterioration in Australia's fiscal headroom at the AAA rating level.

On 7 April 2020, Fitch Ratings (Fitch) also revised CBA’s Long-Term Issuer Default Rating (IDR) from AA- to A+ while the rating outlook remains negative. CBA’s Short-Term IDR has been revised from F1+ to F1 and Tier 2 rating has been revised from A+ (Under Criteria Observation) to A-.

For the first half FY20 ended 31 December 2019, CBA recorded statutory net profit after tax (NPAT) of $ 6,161 million, up 34% and cash return of equity (ROE) of 12.7%. An interim dividend of $ 2 per share was paid out to shareholders. The CBA stock was trading on 20 April 2020 (AEST 12:46 PM) at $ 60.620, down 0.721%.

  • Insurance Australia Group Limited (ASX: IAG)

Insurance Australia operates as a general insurance company across Australia and New Zealand with more than $ 12 billion of premium underwritten every year. The insurance services are provided in Australia via CGU, NRMA Insurance, SGIC SGIO, and other leading brands while in New Zealand, the Company caters to its client via AMI, NZI, State and Lumley brands.

On 30 March 2020, IAG announced a business update covering its response to the coronavirus (COVID-19) pandemic, informing that more than 90% of its staff is working from home and its technology team is well progressed with its plans to set up for rest of the people to do the same. Some of the measures being taken by the Group to support customers and suppliers include travel insurance refunds without penalty for the unused proportion of premiums, deferred premium payments for up to six months for small businesses experiencing financial hardship, and full refunds for small businesses and others.

With respect to 1HFY20 ended 31 December 2019, IAG paid a dividend of $ 0.100 per share. With a market capitalisation of ~ $ 14.61 billion, the IAG stock was trading on 20 April 2020 (AEST 12:57 PM) at $ 6.170, down 2.373%.

Materials Sector

  • Brambles Limited (ASX: BXB)

Supply chain logistics company, Brambles Limited is a pioneer in establishing a business based on pooling of unit-load equipment, crates, pallets, and containers.

Recently on 17 April 2020, the Company released its Q3FY20 business update, posting growth of 6% in revenue from major markets, demonstrating resilient and defensive nature of the business, with strong volume growth and ongoing price momentum across its major markets, notwithstanding heightened uncertainty since the COVID-19 pandemic.

As at 28 March 2020, the Company has funds on deposit of $ 1.1 billion and undrawn committed credit facilities of US$ 1.3 billion, demonstrating a conservative balance sheet and strong liquidity profile.

Brambles also updated its FY20 guidance amidst COVID-19 that now includes a material reduction in contributions from the Automotive and Kegstar businesses in revenue and earnings for the fourth quarter of FY2020, in addition to higher short-term costs (due to changes in the network dynamics) and potential risks (owing to delays in the receipt of compensation income and collection of receivables).

With a market cap of $ 17.63 billion, the BXB stock was trading at $ 11.050, down by 4.577% on 20 April 2020 (AEST 01:01 PM).

  • Newcrest Mining Limited (ASX: NCM)

Australia-based Newcrest Mining Limited, which is engaged in the exploration, development, mining and sale of gold and gold-copper concentrate, announced to have established a $ 20-million worth of Community Support Fund to provide financial assistance to its host communities, so that they can deal with the challenges being presented by the COVID-19 pandemic. Furthermore, the Company has decided to donate a portion of the Fund towards vaccine research as the development of a vaccine for COVID-19 could save many lives worldwide.

Newcrest Mining continues to closely monitor the COVID-19 situation and has introduced a range of control measures across all its operations and projects to contain the spread of virus and minimise the risk of infection to the people.

The Company had paid an ordinary fully paid dividend of $ 0.075 relating to the six months period ended 31 December 2019. With a market cap of $ 21.98 billion, the NCM stock was trading at $ 27.640 on 20 April 2020 (AEST 01:08 PM), down 3.255% from its previous close.


  • Sydney Airport (ASX: SYD)

SYD operates the Sydney, Australia airport and is engaged in the airport infrastructure development and maintenance in addition to leasing terminal space to retailers and airlines. Recently on 20 April 2020, SYD gave a liquidity, half-year distribution, and traffic update, highlighting

  • Securing additional bank debt facilities of $850 million, consequently SYD has available cash of $430 million, undrawn bank facilities of $1.75 billion and approximately $600 million of new USPP bond market debt (due to be funded in June 2020), for combined liquidity of $2.8 billion.
  • Reduction of 20% in directors’ fees and CEO fixed remuneration as part of strict operating expenditure reduction measures.
  • Traffic performance in March 2020 significantly impacted by progressive tightening of travel restrictions.
  • The Company decided not to declare half year distribution for the period ending June 2020.

According to a company announcement dated 14 April, the Group is closely tracking the announcements by the Federal and State Governments’ regarding COVID-19 pandemic, and also working with its airline partners through the exact scheduling impacts on the Airport as it anticipates, and plans ahead of a major but short-term reduction in international and domestic traffic.

Despite the strength of its balance sheet, Sydney Airport is making concerted efforts to sail through this period with caution and thus reviewing its entire capital expenditure program for 2020, with only critical projects ongoing until further clarity is gained regarding the travel industry.

With a market cap of $ 14.19 billion, the SYD stock was trading at $ 6.230, down 0.796% on 20 April 2020 (AEST 01:10 PM).

  • Transurban Group (ASX: TCL)

Road operator company, Transurban is engaged in the development and management of urban toll road networks in Australia and North America. On 16 April 2020, Transurban Group released its March Quarter 2020 update, reporting that Average Daily Traffic (ADT) dropped by 4.8% with significant impacts being felt across all assets and markets due to the travel restrictions imposed by governments all over the world.

The Group’s existing Linkt Assist program has also been expanded to support customers, businesses and other members of the community particularly those facing employment issues as well as other frontline personnel requiring assistance. Furthermore, around 3-months of toll credit would be offered to eligible customers.

During the reporting period, Transurban also raised around $ 2.1 billion in new debt facilities, including $ 1.3 billion in new working capital facilities.

With a market cap of $ 36.05 billion, the TCL stock was trading at $ 13.300, edging up 0.91% on 20 April 2020 (AEST 01:18 PM).

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