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:
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.
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.
||Dividend Yield (%)
||Approx Ex-Div Date
||Pendal Group Ltd
||Charter Hall Group
||Magellan Fin Grp Ltd
||TABCORP Holdings Ltd
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:
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.