Dividend versus growth stocks; a glance at NZX-listed stocks

Summary

  • Dividend stocks provide income at regular intervals reflecting their solid balance sheet and cash flow.
  • Growth stocks do not pay dividend amount and prefer reinvesting the profits to tap their potential for long-term growth.
  • The a2 Milk would continue to make investments towards its brand for long-term growth.
  • Ryman Healthcare noted new sales and resales on the back of market recovery during the final quarter and declared a dividend amount to be paid this month.

Retirement planning or the requirement of a regular income flow are the common reasons leading to an addition of dividend stocks in an investor’s portfolio.  

If an investor envisions developing a growth-oriented portfolio, reflecting solid and persistent stock price appreciation in the course of time, they opt for growth stocks.

Source: Copyright © 2021 Kalkine Media

Do dividend stocks outperform growth stocks?

When the comparisons are drawn between dividend and growth stocks, dividend stocks usually outperform growth stocks due to their business model.

Dividend stocks have often outperformed growth stocks due to regular payments made to the shareholders. As a result, the investors gain in the form of earnings while the stock’s market value increases.

Do growth stocks pay dividends?

Growth stocks do not pay dividends, and such companies tend to reinvest the profits and strive to tap their potential for long-term growth. Such entities are in an expansion phase, aiming to grow in leaps and bounds.

To comprehend growth stocks, let’s take a closer look at a few related companies that are dual-listed.

Source: Copyright © 2021 Kalkine Media

The a2 Milk Company Limited (NZX:ATM; ASX:A2M)

New Zealand-bred entity The a2 Milk Company Limited’s last notification came on 31 May, wherein it conveyed that it acknowledged media reports related to a possible class action against it, which was probed by Slater & Gordon lawyers.

The a2 Milk declared its half-year results closed December 2020 in February this year but paid no dividend to the stakeholders.

On the outlook front, the Company mentioned that it would keep on making an investment towards its brand. Also, it is confident in its ability to push ahead its long-term growth.

At the time of writing, on 16 June, The a2 Milk rose by 2.9%, and was trading at a price of NZ$6.49.

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AFT Pharmaceuticals Limited (NZX:AFT; ASX:AFP)

Domiciled in New Zealand, pharma distributor AFT Pharmaceuticals Limited last month notified the market about its Annual Meeting of Shareholders to be conducted on 6 August in Auckland.

The Company published its annual report to March 2021, emphasising its expectations of robust profit increase during FY22. It mentioned that after the net debt and profits are realised by the Company, it would consider the possibility of a dividend policy. 

AFT Pharmaceuticals was trading in green increasing by 1.10%, at the time of writing, on 16 June, at NZ$4.58.

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ArborGen Holdings Limited (NZX:ARB)

New Zealand-headquartered ArborGen Holdings Limited is creating a high-growth business by producing proprietary seedlings, providing “step changes” in yield to the forestry sector.

On 15 June, in line with the provisions of the ArborGen 2021 LTI Plan, the Company issued 127,315 fresh securities.

Last month, the Company declared full-year results ended March this year. ArborGen’s growth strategy encompasses building a portfolio of superior propriety MCP products by constant investment in R&D.

ArborGen Holdings’ shares remained unchanged at NZ$0.23, at the time of writing, on 16 June.

Related Read; Stocks Move Up As NZX-Listed GXH, ARB & SPY Report Improved Earnings

To know dividend stocks better, let’s take a peek at few related dual-listed stocks.

Source: Copyright © 2021 Kalkine Media

Ryman Healthcare Limited (NZX:RYM)

Functional for 37 years, Ryman Healthcare Limited provides aged care amenities. Last week, the Company welcomed a new Chief Sales and Marketing Executive, namely Marsha Cadman.

In May, the Company released its full-year report to March this year. Ryman Healthcare experienced record final-quarter new sales and resales on the back of market recovery.

Ryman declared the final dividend of 13.6 cps to be paid by 18 June, which took the full-year dividend/distribution amount to 22.4 cps, 50% of underlying profit.

Ryman Healthcare was trading in red, at the time of writing on 16 June, shrinking by 0.99% at NZ$13.06.

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Oceania Healthcare Limited (NZX:OCA; ASX:OCA)

Healthcare services provider Oceania Healthcare Limited of late has provided an update regarding the strike price for the Dividend Reinvestment Plan set at NZ$1.4040/share, with reference to the dividend to be paid this month.

During May 2021, Oceania released 10-month results ended March 2021, recording sales volumes 26% ahead on the pcp. The Company announced a final (not imputed) dividend of 2.1 cps to be paid by 22 June.

On 16 June, at the time of writing, Oceania decreased by 0.66% at NZ$1.51.

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Infratil Limited (NZX:IFT ; ASX:IFT)

Infrastructure investment entity Infratil Limited recently allotted Infrastructure Bonds (IFT310) due 15 December 2027.

In its annual report that ended March this year, Infratil noted proportionate EBITDAF standing at $398.8 million from $3,70.2 million on pcp.

During the reported period, the Company raised $300 million through an equity issue and made an investment of $310 million, acquiring 56.3% of Qscan, an Australian entity.

The Company announced a dividend of 11.5 cps to be paid by 22 June, bringing the total dividend for the full year to 17.75 cps compared to 17.25 cps on pcp.

Infratil marginally declined by 0.39%, at the time of writing on 16 June, and was trading at NZ$7.68.

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Are dividend stocks better than growth stocks?

Dividend distribution is basically percentage of profits earned by a company, which is paid to the stakeholders. With an ability to grant certain income at regular intervals, dividend stocks often have a solid balance sheet and cash flow.

On the other hand, growth stocks do not pay any dividend amount and prefer reinvesting the profits in capital projects. The cash inflow is gained at redemption or after selling the shares of these companies.

Having said that, it depends on the investor’s requirement, and suitability to a portfolio, which makes one stock better than another.  

Dividend stocks are suitable to investors looking for consistent income source. Growth stocks, on the other hand, are apt for investors who are not seeking an immediate cash flow and would rather stay invested for a longer duration.

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