Dividend Stocks in Virus-Stricken Market – WMI, YAL

Summary

• Annual yield is the dividend or payout that investors get annually for their total investment in stocks.
• One of the popular investment options considered by investors is stocks offering attractive dividends.
• WAM Microcap announced fully franked final and special dividends, on the back of strong investment portfolio outperformance.
• In Q2, Yancoal Australia experienced unchanged stockpile levels, as attributable sales (9.3Mt) was same as the attributable saleable production (9.3Mt).

Annual yield is the return or dividend that an investor receives for total investment in securities like stocks, annually. The yield is generally expressed as an annual percentage rate, which is dependent on the current market value and the dividend paid.

Investors look for various options to park their funds for optimising the chance of getting good returns. One of the popular options among investors is the companies that pay good dividends. Thus, several investors consider stocks that have good dividend yield, which is generally closer to or above the government 10-year long-term bonds. However, the acceptable yield is also dependent on the investors’ expectations and investment style.

The companies that have strong balance sheet and lesser capex requirements typically continue to pay a good amount of dividends year on year. The investors in this way are able to maximise the return on the investment made. It also reflects that the company operates in sectors with good fundamentals and they are able to manage capital efficiently and effectively that can survive well in any situation. Such capital management is an important factor even in the ongoing unprecedented situation, where the world is facing uncertainties due to the COVID-19 pandemic.

At present, when the benchmark cash rate is at historic low, low rates are being offered by financial institutions and banks on deposits. Consequently, risk-averse investors might consider re-visiting their portfolio to gain full benefit from their investments.

Also Read: Are Dividends from Listed Investment Companies Shock Proof?

More on Dividend Yield

Companies that generate stable cash flows, and do not require to reinvest their profits are the ones that generally pay good dividends to their investors. Some sectors or industries are good at paying dividends. These sectors or industries typically include healthcare and energy sectors, banks, fast-moving consumer goods, segments that cater to household goods, utilities, etc.

Dividend represents total income that an investor receives from the investment in a stock or the ones that include high dividend-yielding asset during the fiscal year. The dividend yield reflects the aggregate amount of dividend payments anticipated. The investor receives dividends either from stocks or other investments, funds or from a portfolio.

The dividend yield is primarily represented on an annualised basis. The dividend amount distributed depends on the management future outlook of the business and the dividend policy. When the dividend rate is represented as a dollar amount per share, it is referred to as dividend per share or DPS.

Dividend yield is the ratio of a company's annual dividend relative to its current share price. Therefore even if dividend remains the same, and share price falls, dividend yield will increase and vice versa.

In that backdrop, let us discuss two dividend stocks listed on ASX.

WAM Microcap Limited (ASX:WMI)

Australia-based investment firm WAM Microcap Limited (ASX:WMI) recently on 3 August 2020 announced a fully franked final dividend of 3 cents per share (cps) and a fully franked special dividend of 3cps.

With these new dividends scheduled to be paid on 23 October 2020, total fully franked dividend for FY20 stood at 9cps, representing a 33.3 per cent increase year-on-year. Based on its 31 July 2020 share price of AUD 1.375, full-year dividend provides shareholder with a 6.5 per cent fully franked dividend yield and a 9.4 per cent grossed-up dividend yield.

For the 12-month period to June 2020, the company reported a strong performance of investment portfolio, outperforming the S&P/ASX Small Ordinaries Accumulation Index by 17.5 per cent. WAM Microcap's pre-tax NTA as at 30 June 2020 was AUD 1.31 per share.

The company also announced the opportunity to purchase shares of up to AUD 30,000 under a Share Purchase Plan (SPP). The issue price for each SPP share will be equivalent to the company's net tangible asset (NTA) backing per share as at 31 July 2020, anticipated to be announced on or before 14 August 2020.

Related: Investors are looking at WMI, RFF for Dividends - Did you miss the Boat?

On 13 August 2020 (AEST 11:52 AM), WMI was trading at AUD 1.525, moving upward by 0.66 per cent with a market cap of AUD 214.91 million.

Yancoal Australia Ltd (ASX:YAL)

Yancoal Australia Ltd (ASX:YAL), which operates and manages many coal mines across Australia, paid the 2019 final dividend of 21.21cps in April 2020, bringing the total for the year to 31.56cps. As of 13 August 2020, the company has an annual dividend yield of 15.47 per cent.

During mid-July 2020, YAL released its quarterly report for the period ended 30 June 2020, highlighting

• 9Mt ROM coal production, down by 1 per cent from Q2 2019.
• 3Mt attributable saleable coal production, up by 3 per cent year-on-year.
• 3Mt mine production sales, representing an increase of 13 per cent from the same period a year ago.
• AUD 87 per tonne average realised coal price, down by 25 per cent year-on-year.
• 91 12mth rolling TRIFR, down from 7.19 at the end of Q1 2020.

Guidance includes:

• Saleable coal production, about 38Mt (attributable)
• Operating cash costs, about AUD 61 per tonne (excluding royalties)
• Capital expenditure, less than AUD 380 million (attributable)

Yancoal's average realised price for the first half was AUD 94 per tonne, compared to AUD 124 per tonne achieved in 1H 2019. The company recently replaced a debt facility that had a USD 1.275 billion limit at 31 December 2019 and maintained a stable financial position after the final dividend payment.

On 13 August 2020 (AEST 11:53 AM), YAL was trading at AUD 2.050, up by 0.985 per cent, with a market cap of AUD 2.68 billion.

Good Read: Thermal Coal Outlook – The Unfolding Australian Market