Why does dividend matter to investors? A peek at the related NZX stocks

Summary

  • Investors across the world are attracted towards the dividend-paying stocks which guarantee a regular stream of income.
  • Also, declaration of dividends is of utmost importance, both to the shareholders as well as the companies.
  • New Zealand is home to some of the renowned companies of the world, which offer attractive dividends to their shareholders.

Investing in dividend stocks is a safe approach for building one’s wealth. It is considered as one of the most important barometers while investing in stocks both by new as well as seasoned investors.

What are dividends?

Companies distribute a portion of their profits to the shareholders when they have a healthy cushion of funds. Typically, dividends are shares of a company’s profits given to the shareholders on a periodic basis, which can be annually, half-yearly or quarterly.

In other words, dividends are nothing, but rewards given by a company to its investors for having confidence in the Company’s business and putting their money into the venture.

Source: © Moth | Megapixl.com

What do dividends signify?

Declaration of dividend is important, both from the investors’ perspective as well as from the Company’s point of view. While investors want a regular and steady income stream, declaring dividends reflects the financial well-being of the company. It attracts potential investors, thereby increasing the demand for the company's stocks.

Some of the most important reasons as to why dividends matter are enumerated below:

Apart from keeping a close watch on the dividend policy of the company, investors must keep a tab on the few important dates to ascertain whether they qualify for dividends or not.

They are:

  • Announcement date: This is the date on which a company makes an announcement to distribute dividends among its shareholders.
  • Record date: Commonly known as the cut-off date, the record date determines which shareholders are eligible for receiving the dividends as per their registration status.
  • Dividend date: The payment date of the dividend when a company finally credits the dividend payment in the shareholders’ account.

Which companies are the best dividend payers?

Generally, big, and established companies with steady growth are the best dividend payers. Apart from maximising their profits and seeking long-term growth, these companies also focus on enhancing their shareholders' wealth.

Companies pertaining to the following sectors are usually seen to be good as well as regular dividend payers:

New Zealand houses some of the most dynamic and profitable companies across Australasia. These companies are known for their solid dividend payouts.

Let us take a glance at some of the top NZX stocks which are declaring dividends:

Fisher & Paykel Healthcare Corporation Limited (NZX:FPH)

Based in Auckland, Fisher & Paykel Healthcare Corporation Limited is a healthcare giant offering respiratory care to patients. Its products and systems are widely used in more than 120 countries across the globe.

Driven by unparalleled demand for its hospital products under challenging times, the Company announced a record NPAT of NZ$524 million in FY21, up 82% over its preceding year.

It will pay 22.0 cps as a final dividend in July this year, thus bringing 38.0 cps as the cumulative dividend for the year.

On 18 June, Fisher & Paykel Healthcare Corporation settled the day at NZ$30.78, down by 0.39%.

Must Read: Look at these 5 interesting NZX Dividend stocks going Ex in June 2021

Mainfreight Limited (NZX:MFT)

Another heavyweight company that offers attractive dividends to its shareholders is Mainfreight Limited. It is one of the prime freight companies in Aotearoa, with more than NZ$7 billion as its market capitalisation.

Despite initial disruptions in its supply chain owing to the pandemic, the Company successfully steered through the headwinds and reported a satisfactory performance for the year ended 31 March 2021.

Both its revenue of NZ$3.54 billion and PBT amounting to NZ$262.41 million increased considerably by 14.5% and 27.2%, respectively.

The Board has approved a final dividend of 45.0 cps payable on 16 July, thereby bringing the full-year dividend to 75.0 cps.

The shares of Mainfreight dropped by 0.4% at NZ$73.470, by the end of the trading session on 18 June.

Don’t Miss: Why to consider investing in industrial stocks?

Trustpower Limited (NZX:TPW)

Third, we would be looking at Trustpower Limited, a leading electricity generator and electricity retailing company in New Zealand.

Underpinned by a balanced asset portfolio and a solid performance both in retail and generation, the Company posted a power-packed performance for FY21, with retail earnings climbing 33% to NZ$ $47.0 million in the said period.

Moreover, its EBITDAF stood at NZ$200.2 million, up by 7% on pcp.

TPW will pay an interim dividend of 17.0 cps along with a special dividend of 1.5 cps on 18 July, thus providing a total dividend of 35.5 cps for the year 2021.

On 18 June, Trustpower dipped by 0.74% at NZ$8.090, at the time of writing.

Look At: 5 Hot NZX Dividend Stocks That Deserve Your Attention

Scales Corporation Limited (NZX:SCL)

Last on the list is Scales Corporation Limited, supplier of essential services to Aotearoa’s primary sector for the past 100 years. Currently, it carries its business operations in three divisions, namely, horticulture, logistics and food ingredients.

Owing to its diversified agribusiness approach and a strong performance by its food ingredients segment, the Company recorded a robust annual result for 2020 with revenue amounting to NZ$470.7 million and underlying EBITDA of NZ$53.9 million.

SCL continues to focus on its agribusiness ventures and plays to its strengths.

The Company will distribute 9.5 cps as a final dividend among its shareholders in the next month.

The shares of Scales Corporation gained 0.63% at NZ$4.820, on 18 June, at the time of writing.

Also Read: How NZX dividend stocks are managing healthy payouts amid low-interest rate scenario

Dividend-paying stocks are generally considered a safe bet if one is looking to create or maintain a strong long-term portfolio.

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