The Buzz Around NZX Dividend Stocks at this Time of Dismay

  • Mar 30, 2020 NZDT
  • Team Kalkine
The Buzz Around NZX Dividend Stocks at this Time of Dismay

The global outbreak of COVID-19 has created a ruckus in the world, the effect of which can be seen upon the equity markets across the globe. To date, investors are still in a state of ambiguity over their incomes and employment, given the current situation where organizations are employing temporary stand-downs for cost-cutting and even relieving employees from their roles.

The looming mountain of uncertainty in the market, along with decreased interest rates, are keeping investors interested in dividend stocks in hope for an income stream. Given this backdrop, investments in the dividend stocks can be a prospective path to avoid a high degree of risk associated with the growth stocks.

Moreover, the current times of high inflation, coupled with declining interest rates have weighed heavily on the investors’ pocket. Amidst such times, investors are looking at risk-averse options for investments while making a profit from the same.

Dividend stocks can be a solution for such concerns of investors as they not only provide passive income to the investors in the form of interest but also carry the potential for dividend growth coupled with capital appreciation.

Moreover, dividend stocks in a portfolio offer the feature of compounding, which means that the earning generated through dividend stocks shall be reinvested and is likely to create further gains from initial earnings for the investors.  

Let us look at some of the dividend stocks listed on the New Zealand’s Exchange (NZX):

Australia and New Zealand Banking Group Limited (NZX:ANZ)

Australia and New Zealand Banking Group Limited (NZX:ANZ) is currently one of New Zealand's largest companies based on profit and assets and has a global reach with brands like ANZ, ANZ Investments, UDC Finance, and Bonus Bonds.

The dividend history of ANZ for the last three years shows that the Company has been paying interim and final dividends to its shareholders on a regular period. A snapshot of ANZ’s historical dividends is as follows:

 

Source: ASX

The Company’s upcoming Ex-dividend date for Interim Dividend is 11 May 2020, and the same is scheduled to be paid on 1 July 2020.

ANZ is focussed on enhancing the financial wellbeing of its customers and delivering decent returns for its shareholders while accomplishing stability between growth and return. During 2019, ANZ celebrated 50 years of operations in Japan while still operating at a global level.

To assist in the recovery from the current COVID-19 crisis, ANZ recently introduced an exceptional support package with the potential to inject $6 billion into the Australian economy, for small business and home loan customers.

Westpac Banking Corporation (NZX:WBC)

Westpac Banking Corporation (NZX:WBC) is one of the largest banks in New Zealand as well as Australia’s first bank and the oldest Company that offers a wide range of banking and wealth management services to customers, business as well as institutions.

The Company has been consistently responsive to the dividend payments to its shareholders at regular intervals. Westpac has been delivering both interim as well as final dividends to its shareholders from the last three years.

A snapshot of the Company’s historical dividends is given below:

 

Source: NZX

During 1HFY19 period ended 31 March 2019, WBC reported a statutory net profit of $3,173 million, and cash earnings were recorded at $3,296 million.

Telstra Corporation Limited (NZX:TLS)

Listed on NZX in 1997, telecommunication giant Telstra Corporation Limited (NZX:TLS) offers services like telecommunications and information services, including mobiles, internet, and pay television.

A snapshot of Telstra’s dividend distribution is given below, reflecting a special dividend announced on 26 February 2020 and the Company has shown consistency in offering dividends to its shareholders.

 

Source: ASX

Telstra is amidst one of those few companies that have paid or have not deferred their dividend payment to its shareholders as a measure to curb the financial impact of the COVID-19. Companies across the globe have implemented several other measures like reduced capex as well as stand-down of employees.

Moreover, the Company shall recruit an additional 1,000 temporary contractors in Australia to help manage call centre volumes and has paused any further reductions in jobs over the next six months.

In the hard times due to the COVID-19 pandemic, over 25,000 people are working from home for Telstra, and the Company believes that the outlook is difficult to predict at this time of high uncertainty.

Australian Foundation Investment Company Limited (NZX:AFI)

Another dividend-paying stock is the Australian Foundation Investment Company Limited (NZX:AFI), which the largest LIC in Australia and aims to provide shareholders with attractive investment returns. The Company has maintained consistency in providing dividends to its shareholders. A snapshot of the same is given below:

 

Source: ASX

Following core principles lie at the heart of the investment philosophy of the Company:

  • Buy and Hold investment style over the long-term
  • Sound returns with lower variability
  • A growing stream of franked dividends
  • Investment in quality stocks
  • Focus on tax efficiency
  • Portfolio diversification
  • Nursery development
  • Investment Committee participation
  • Use of Trading Portfolio
  • Conservative Gearing
  • Monitoring existing stocks in the portfolio

 

For the half-year ended 31 December 2019, the Company posted a profit of $146.1 million. AFI has continuously adjusted the portfolio while reducing the number of companies held to focus further on quality businesses with a competitive advantage, robust returns on invested capital and resilient balance sheets to a deliver a very satisfactory portfolio performance.

Moreover, the portfolio of AFI 5.4 per cent for the six months to 31 December 2019 as compared with the S&P/ASX 200 Accumulation Index, which increased by 3.8 per cent over the same period.

Also, AFI’s portfolio return (including franking), was recorded at 25.5 per cent for the 12 months to 31 December 2019 while the return from the S&P/ASX 200 Accumulation Index (including franking) was 25.4 per cent over the same period.

Lastly, it is sustainability in dividends that holds more importance in current times and not the quantity of dividends. Businesses across the globe are undergoing turmoil, and we could be facing a recession anytime soon. Payment of dividends at such times does reflect the liquidity and sturdiness of the balance sheet.

   
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