Stocks with Decent Dividend Yield

  • May 15, 2020 NZST
  • Team Kalkine
Stocks with Decent Dividend Yield

It is well known that when you buy a share of the company, you become a part owner of that company and, as a shareholder, you can expect dividends. Generally, the Board of Directors announce the payment of dividends and, in some circumstances, they can also cancel this payment. However, the company has to think about the following:

  • Saving the excess cash for future use,
  • Reducing the company’s debt,
  • Buy-back of shares

 

Dividends are not fixed income, but generally, investors rely on them as a source of income with companies offering dividend payment from time to time (quarterly, semi-annually, annually). Some investors design their portfolio in such a way that they receive a planned dividend every month. This strategy is usually applied by older people who can use this method as a retirement plan. The younger generation, who have other sources of income, can re-invest the amount in buying additional shares of the company.

The most commonly used and most effective way of measuring dividends is through: Dividend Yield. Dividend yield is calculated by dividing company’s annual dividend by its current market price. Most of the dividend-seeking investors generally look at this metric when it comes to making investment in a stock.

There is one way to check the dividend’s safety, by looking at its pay-out ratio. Some of the investors track the pay-out ratio of the company on the regular basis. Dividends can be considered as a reward to the investors. Generally, the investors tend to invest their capital in the companies which pay higher dividends.  

With that idea in mind, we would now have a look at some companies with decent gross dividend yield.

Skellerup Holdings Limited (NZX: SKL)

Skellerup Holdings Limited (NZX: SKL) is a New Zealand based distributor, manufacturer and designer of vacuum systems and polymer products. The company has two divisions: Agri and Industrial.

For the six months ended 31st December 2019, the company reported unaudited net profit after tax of $12.1 million. EBIT declined by 7% to $18.0 million, and NPAT declined by 10% on the YoY basis. EBIT from Agri Division segment improved by 5% to $10.1 million. Industrial Division EBIT decreased by 15% to $9.9 million. The company declared an interim dividend of 5.5 cps.

SKL Financial Highlights (Source: Company Reports)

As per the release dated March 30, 2020, demand throughout March has remained strong across business due to which, the YTD earnings were ahead of the pcp. However, SKL withdrew its previous guidance that NPAT for FY 2020 will be consistent with the result that was witnessed in pcp.

The company possesses robust balance sheet, and has low debt as well as significant undrawn, committed facilities which guarantees that it is well positioned to succeed through the uncertain period. The company has a gross dividend yield of 7.963%.

Stride Property Ltd & Stride Investment Management Ltd (NZX: SPG)

Stride Property Ltd & Stride Investment Management Ltd (NZX: SPG) is an NZX listed stapled group comprising Stride Property Limited (Stride) and Stride Investment Management Limited (SIML).

For the six months ended September 30, 2019, Stride Property Group posted net rental income amounting to $28.4 Mn. Profit before income tax stood at $44.8 million, up $0.8 million and profit after income tax of $37.4 million.

The distributable profit after current income tax stood at $19.3 million. The company reported a net valuation gain of $25 million or 2.6%, which resulted in Net Tangible Assets per share of $1.97, up 5 cps from $1.92 as at 31st March 2019.

Financial Performance (Source: Company Reports)

While the full negative impacts from the COVID-19 pandemic on the company’s business are not yet clear, its diversified business, low committed leverage, significant banking headroom, together with the measures taken to manage costs and the financial impact of the shut down to its tenants, have placed the company in a very strong position to manage the impacts of COVID-19.

Given this, the company has confirmed that it intends to pay its fourth quarter dividend in June 2020 in line with prior guidance, assuming no further economic deterioration due to COVID-19. The company has a gross dividend yield of 8.344%.

Argosy Property Limited (NZX: ARG)

Argosy Property Limited (NZX: ARG) happens to be one of the largest diversified property investment vehicles which is listed on NZX. Recently the company released its 31 March year end valuation update. The company posted full year portfolio revaluation gain amounting to $61.7 Mn, reflecting a 3.6% rise over book value. Of this, $50.8 Mn was booked in September 30, 2019 interim results.

As per the release, Auckland was the biggest contributor to the revaluation gain with $49.7 Mn or 81% of the total portfolio gain. By sector, Industrial provided the greatest contribution at $53.4 Mn, a rise of 6.8%. The Office portfolio rose $21.3 Mn, or 2.9% and Large Format Retail fell $13.0 Mn or -6.5%.

The company possesses diversified portfolio of properties by location, type, and tenant. As at February 29, the portfolio was weighted 45% towards Industrial, 38% towards Office and 17% towards Large Format Retail.

By location, 72% of the portfolio was in Auckland and 26% in Wellington. The company maintained high occupancy at 98.4% and has a weighted average lease term of 6.1 years. As per the release, the ongoing impact of coronavirus is not known. The gross dividend yield of ARG stood at 7.297%.

 


Disclaimer
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.

 

   
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