2 Income Stocks with Good Dividends – SCG and SKI

Scentre Group (ASX: SCG)

SCG Details

Growth in customer visitation and retailer demand: Scentre Group, whose strategy is to own pre-eminent retail property portfolio in Australia and in New Zealand, is extremely well-placed with its unique platform of high-quality centres so that it can become an eco-system driver that connects the customer with retailers, products, services and experiences. The Group confirmed its guidance for full-year growth in funds from operations (FFO) of approximately 4 per cent and distribution of 22.16 cents per security. It was noted that total specialty in-store sales increased by 20 per cent for the quarter ending on 31 March 2018 (1Q FY18) and 1.4 per cent for the year. Total stable portfolio sales went up for the quarter as well as for the year. The Group successfully opened the $80 million redevelopments of Westfield Plenty Valley in March 2018 which was 100 per cent leased. All active developments were progressing well. These developments target to deliver a return of more than 7 per cent of yield and an Internal Rate of Return of more than 15 per cent.


Retailer In-store sales Growth (Source: Company Reports)

The Group released a notice for buying back 400,000 shares and before the notice the Company has already bought back 4,851,928 shares for a consideration of $19,826,047.68. It is expected that its redevelopment of Westfield Newmarket in Auckland will create a world-class retail and lifestyle destination unparalleled in the New Zealand market. The Group believes in creating extraordinary places, connecting and enriching communities. There is no doubt that industry’s evolution will continue as those brands that no longer perform or are not relevant or desirable to customers will fall away. The Group’s buy-back program will be managed in a manner that will be consistent with its current strong long-term rating. ROIC improved from 4.4 per cent to 8.4 per cent as at December 2017.The share prices climbed up by 8.33 per cent in last three months and were up by 6.94 per cent in last one month. The stock rose up by 2.97 per cent in last five days. We give a “Buy” recommendation at the current market price of $4.22 after looking at the current retail landscape and as the Group expects a solid performance in its underlying businesses.
 

SCG Daily Chart (Source: Thomson Reuters)
 

Spark Infrastructure Group (ASX: SKI)

SKI Details

Strong track record of growing distributions: Spark Infrastructure has witnessed a 1.3% fall in share price on May 24, 2018, with the news relating to Australian Energy Regulator and energy minister Josh Frydenberg pursuing policies to reduce consumer power prices. This is said to have some impact on the group. On the other hand, Spark’sdistribution network assets deliver electricity to customers across the whole of South Australia, and throughout the Melbourne CBD. It is the leading ASX-listed owner of Australia’s most efficient and reliable regulated electricity assets. The Group reaffirmed its distribution guidance of 16.0 cents for 2018 that represents a growth of 4.9 per cent on 2017 and this guidance was based on the distributions which Group expects to receive from its investment portfolio and is subject to business conditions. The Group expects each of its investments to perform strongly. Its strategy remains to support its investment businesses to capitalise on growth opportunities and invest prudently to innovate for the new energy future. It continues to seek growth opportunities that are aligned with its strategic vision and are financially compatible with its existing risk profile within the utility-style spectrum.



Distribution Trend (Source: Company Reports)

Over the 5-year period ending on 31 December 2017, Spark Infrastructure has delivered a total securityholder return of 105.1 per cent as compared with the broader market’s 60.8 per cent, which reflects Group’s consistent long-term performance. Moreover, in 2017, Spark Infrastructure’s share of earnings before interest, tax, depreciation and amortisation (EBITDA) on a proportional basis grew by 4.5 per cent and amounted to $792 million. SA Power Networks delivered $8 million of savings in 2017, and is on track for their savings target of $40 million p.a. TransGrid forecasted to deliver further cost savings of 3 per cent for the year to 30 June 2018. The Group expects to grow and provide good margins, and Group’s corporate restructuring is on track and will be in place by 30 June 2018, and hence it expects the cash distributions from TransGrid to grow moving forward. The stock prices have been falling since the start of the year and declined by 9.64 per cent and fell by 6.25 per cent in last three months. The stock witnessed some recovery in last five days and rose up by 4.17 per cent. By looking at the overall performance, we maintain a “Buy” on the stock at the current market price of $2.22.
 

SKI Daily Chart (Source: Thomson Reuters)

 
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