Dividend Game of Popular Stocks: JBH, SUL, COL, TLS

Summary

• Owing to the economic downturn caused by COVID-19, many dividend-paying sectors have been noticeably cutting their payouts. Consequently, investors have been on a lookout for reasonable and sustainable yields.
• Experts opine that dividends will not fade completely. Some sectors may just suspend payments until things recover, while others may reduce rather than completely cancelling the payouts.
• Popular stocks on ASX from diverse sectors have continued to fetch market attention for having portrayed a resilient approach to dividend distribution even in times of crisis.

While COVID-19 involuntarily made most investors to learn to live with dividend cuts, some promising businesses have been attempting to stand strong in the dividend ball game.

Beating dividend cut blues could be tricky in an environment with a rapid uptick in the number of companies that have suspended dividend payments to preserve assets and capital. A slash in dividend payout not only reduces one’s income but also cuts a fair part of portfolio value.

However, operating at the heart of globally desirable, deep, and liquid Australian financial markets, ASX has a hoard of companies that offer attractive dividends to investors.

According to S&P Global, on a year over year basis, the annualised growth rate of dividends for S&P ASX 200 listed companies was about 3.3% for the five-year period from March 2014 to March 2019. Moreover, in the same period, the S&P/ASX 200 (TR) grew about 7.4% per year. ~63% of this growth came from the reinvestment of dividends.

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In this backdrop, let us understand the dividend stance of four popular ASX 200 listed stocks-

JB Hi-Fi Limited (ASX:JBH)- Annual Dividend Yield of ~3.5%

JBH recently welcomed Stephen Goddard to succeed Greg Richards as Chairman of both the Board and the Remuneration & Nominations Committee. Witnessing strong sales growth in 2H20, particularly in JB HI-FI Australia and The Good Guys with customers spending more time working, learning, and enjoying entertainment at home, JBH maintains a disciplined cost control approach.

Owing to strong performance through April and May, the Group expects FY20 Total sales to be circa $7.86 billion and total NPAT to range between $300 million to $305 million (post NZ impairment), an increase of 20% to 22% on the pcp.

The Company paid an interim dividend (up 8.8% to 99 cps) in March 2020, representing 65% of Pre AASB 16 NPAT. The current dividend payout ratio is 65%, which JBH feels appropriately balances profit distribution, debt repayment and earnings reinvestment.

Super Retail Group Limited (ASX:SUL)- Annual Dividend Yield of ~6.3%

Regarding itself as one of Australasia’s top 10 retailers, SUL recently concluded 1 for 7 accelerated pro-rata non-renounceable entitlement offer, raising approximately $44 million at the offer price of $7.19 per share. This followed the institutional component of the Entitlement Offer that raised approximately $158 million at the same offer price (together ~ $203 million raised). The equity raising is likely to aid SUL in the execution of its strategy and pursue strategic growth initiatives.

The Company proclaimed that the Board would consider FY20 final dividend post equity raising and balance sheet assessment. Moreover, Group sales rebounded strongly in May after a decline in April, led by the Supercheap Auto, Rebel and BCF brands and continue to benefit from the strong consumer environment in June.

Coles Group Limited (ASX:COL)

CEO Steven Cain believes that Coles is taking steps to help restore Australia’s economic recovery- hiring additional 12k team members, continuing multi-billion dollar capital, operating expenditure plans to reinforce future growth, continuing to prioritise value for customers and sporting and community sponsorships. Interestingly, the Company has paid interim dividend of over $400 million to shareholders, which, according to Mr Cain, directly and indirectly benefits millions of Australians.

The Company will be reporting its FY20 results (along with Q4 retail sales results) on 18 August 2020 and a virtual Annual General Meeting will be conducted on 5 November 2020.

Telstra Corporation Limited (ASX:TLS)- Annual Dividend Yield 2.86%

Work remains underway to realign Telstra’s T22 strategic roadmap, a strategy that was launched a couple of years ago. Other planning mechanisms, making decisions about what it maintains, what it pauses and what it chooses to accelerate, to ensure that it emerges from this crisis in a strong position remain focus areas too.

The Company recently announced ~ $860 million bond issue to further strengthen its balance sheet and using proceeds for general corporate purposes including prefunding of future debt maturities. The Company has also secured an additional US$940 million* in bank facilities, and we now have a total of US$3.6 billion* of committed bank facilities.

On the dividend front, the Company paid interim dividend in March end, distributing US$951 million* to shareholders- which it deems as a vital stimulus to shareholders and the economy. At the time, underlying EPS was reduced by 1.5 cents.

While COVID-19 continues to wreak havoc on businesses globally and companies choose to retract, suspend, or reduce dividends, the staged reopening of economies and restart of business activities seem to be a legit silver lining. Consequently, more companies are likely to up their dividend game as the situation nears normalcy- a stage that has already begun.

GOOD READ: All About Smart Dividend Investing

(Note: All currency in AUD unless specified otherwise)