High Yield Stocks - November 2018
High Yield Stocks - November 2018

Topic

This report scans the ASX200 universe for high yielding stocks, and identifies companies that are at risk of dividend cuts by assessing a combination of factors including price stability, earnings revisions, free cash flow and payout ratios. Dividend yields are based on a rolling 12 month forecast.

The below is a preview from our High Yield Stocks research report. To view this report in full visit the Patersons Client Portal.

 

Dividend Model Update


Top Sustainable Dividend Stocks

Analysing the ASX100 in search of sustainable, high dividend yield stocks, we have filtered out the top quartile, based on risk of having their dividends cut: AMP, AWC, HVN, CSR, FMG, BHP, MPL, CWN, ABC and WHC. The highest yielding stocks, excluding Infrastructure & REITs, as rated by our models as sustainable, are highlighted below:

HYS-Nov18-Graph-1.JPG

Banks have experienced a re-rating following their full year results, with the sector remaining attractively priced on relative value, despite numerous industry headwinds. BHP has announced its US$10.4bn capital return to shareholders by way of an off-market buy back, currently underway, and a special dividend estimated at $1.40 per share (announced 17 December, ex dividend 10 January 2019).

While we remain cautious on the Australian infrastructure and listed property companies given the prospect of rising bond yields, the sector has performed well during the recent market correction, as investors increased their defensive exposure.

HYS-Nov18-Graph-2.JPG

There is strong evidence to suggest traders can capture alpha (excess returns) if they buy sustainable fully franked high yielding stocks 30-40 trading days before the company goes ex-dividend. Income investors will begin to focus their attention on the upcoming Infrastructure and REITs dividends.

Upcoming cum-div ASX100 stocks are highlighted below.
 
Code Company PE (x) Dividend Yield (%) Franked (%) Approx Ex-Div Date
PDL Pendal Group Ltd 13.5 6.2 15 06-Dec
APA APA Group 35.2 5.1 32 28-Dec
CHC Charter Hall Group 16.4 4.9 37 28-Dec
DXS Dexus 17.9 4.7 10 28-Dec
GPT GPT Group 16.5 4.7 0 28-Dec
MGR Mirvac Group 13.6 5.2 0 28-Dec
SGP Stockland 10.2 7.3 0 28-Dec
SYD SYD Airport 36.5 5.6 0 28-Dec
TCL Transurban Group 57.2 5.1 9 28-Dec
VCX Vicinity Centres 15.2 5.8 0 28-Dec
MFG Magellan Fin Grp Ltd 15.0 6.0 100 08-Feb
SCG Scentre Grp 15.7 5.4 11 13-Feb
TAH TABCORP Holdings Ltd 21.2 4.9 100 13-Feb
CBA Commonwealth Bank 13.1 6.0 100 14-Feb

Each month we run a stress test based on four factors (earnings revisions, trend in payout ratio, price stability and strength of recurring cash flows) to find companies that are most at risk of a dividend cut for the coming year. ASX100 stocks most at risk are highlighted below:


HYS-Nov18-Graph-3.JPG


 

Warning: This report is intended to provide general securities advice, and does not purport to make any recommendation that any securities transaction is appropriate to your particular investment objectives, financial situation or particular needs. Prior to making any investment decision, you should assess, or seek advice from your Adviser, on whether any relevant part of this report is appropriate to your financial circumstances and investment objectives.