Eight Fully franked dividend paying blue-chips

 
Australia and New Zealand Banking Group Ltd



ANZ Details

Won Bank Fees Case: Australia and New Zealand Banking Group Ltd (ASX: ANZ) has won the bank fees case against IMF Bentham class action. The High Court has dismissed IMF’s appeal pertaining to class action against the bank since 2010, claiming it unfairly overcharged people for paying their credit card bills late. Meanwhile, ANZ stock has risen 6.1% in the last four weeks (as of August 04, 2016), and we believe the stock would continue to rise in the coming months. ANZ is now exploring strategic options for share investing and this may include sale of its share trading platform. ANZ also released its next interest payment date in January 2017 for CNY 2,500,000,000 4.75% fixed rate subordinated notes due Jan 2025. The stock has an outstanding fully franked dividend yield and is trading at a lower P/E. Based on the foregoing, we maintain a “Buy” recommendation on the stock at the current price of $25.25
 

ANZ Daily Chart (Source: Thomson Reuter)
 
Commonwealth Bank of Australia



CBA Details

Rising Bad Debt: Commonwealth Bank of Australia (ASX: CBA) has been facing pressure on its bad debts front which rose to $427 million in the third quarter of 2016, a 67% increase as compared to the prior corresponding period.
 


Credit Quality (Source: Company Report)
 
In addition, the Australian Securities and Investments Commission is investigating claims handling by the Commonwealth Bank’s life insurance business, and penalties will be levied if a legal breach is revealed. Moreover, the bank’s margin would be affected by falling interest rates, coupled with the ongoing turmoil in the markets. The bank’s annual results are due on August 10, 2016. We give an “Expensive” recommendation on the stock at the current price of $76.15
 

CBA Daily Chart (Source: Thomson Reuter)
 
BHP Billiton Limited



BHP Details

Positioning for uncertain situations: BHP Billiton Limited (ASX: BHP) recently reported that they would make a provision in the range of US$1.1 billion to US$1.3 billion, which is over 50% share of the current estimate of Samarco’s funding obligations as per Framework Agreement of March 2016. This move from the group indicates that the group is positioning itself in the current ongoing uncertainty surrounding the nature and timing of a potential restart of Samarco’s operations. Moreover, BHP board has also approved US$134 million to support the Foundation to allow the continuation of reparatory and compensatory programs. On the other side, BHP has exceeded the full year 2016 production guidance for petroleum, copper and metallurgical coal, and achieved record full year production at Western Australia Iron Ore (WAIO).
 


Production for FY 16 & Guidance for FY 17 (Source: Company Reports)
 
BHP expects to achieve the FY16 unit cost guidance at the major assets, with unit costs forecast to decline further next year. After positive results at Shenzi North in FY16, the exploration drilling has begun in Trinidad and Tobago, and in the Gulf of Mexico. The Los Colorados Extension project’s first production is expected to deliver by second half of FY17. We maintain a “Buy” recommendation on the stock at the current price of $20.03

 
BHP Daily Chart (Source: Thomson Reuter)
 
Rio Tinto Limited



RIO Details

Mixed half year result: Rio Tinto Limited (ASX: RIO) reported its half year result with 47% fall in underlying earnings to US$1.56 billion (A$2.05 billion) at the back of lower prices of commodities. However, RIO reported for a net profit of US$1.71 billion (A$2.24 billion) which is a significant rise from the previous year’s US$806 million. Unlike iron ore and copper, Rio’s aluminium business performed better than expectations. The company has reduced gross debt by almost US$2 billion (A$2.62 billion). The company has been able to maintain balance sheet robustness while generating net cash from operating activities of $US3.2 billion despite the continued volatility and lower commodity prices, coupled with efforts on tightening control over capital expenditure. The miner lately announced for completion of sale of Mount Pleasant coal assets to MACH Energy Australia Pty for US$220.7 million and royalties.
 


Cost Reductions (Source: Company Reports)
 
The stock is trading ex-dividend on August 11, 2016 and has risen 20.56% in the last six months (as of August 04, 2016). We maintain a “Buy” recommendation on the stock at the current price of $49.52
 

RIO Daily Chart (Source: Thomson Reuter)
 
Woolworths Limited



WOW Details

New Operating model would drive benefits: Woolworths Limited (ASX: WOW) chose Bega Cheese to manufacture and pack a range of its private label products including the cheese, UHT, adult milk powder and cream. Meanwhile, the recent operating model review, indicates recovering signs of the group given better customer scores, improvement in the team engagement scores and the constant growth in the transaction along with item growth, which is now positive. Moreover, the group review has led to the restructuring costs of $959 million ($571 million non-cash) or $766 million after tax which would be recognized in the FY 2016 results. WOW is taking cautious expansion plans and accordingly slowed the new Australian Supermarkets rollout while focusing on renewing the current stores and intends to close the underperforming or unprofitable stores. We believe the group’s investments in new product ranges, pricing points and customer scores would drive benefits in the coming months. Trading at a fully franked dividend yield, we maintain a “Buy” recommendation on the stock at the current price of $23.41
 

WOW Daily Chart (Source: Thomson Reuter)
 
Westpac Banking Corporation



WBC Details

Impairment charges: Westpac Banking Corp.’s (ASX: WBC) division, Westpac Institutional Bank (WIB) was affected by lower net interest margins in the first half 2016, and even incurred major impairment charges related to four large exposures which added $252 million to provisions. On the other side, the bank finished the offer of Westpac Capital Notes of over 17 million issued at a Price of $100 each, to raise around $1.7 billion.
 


WBC’s divisional performance (Source: Company Reports)
 
WBC has launched a 10 year NZD subordinated notes offer of up to NZ$250 million with the ability to accept unlimited oversubscriptions (Offer). Meanwhile, the bank’s chief operating officer, John Arthur has decided to retire. WBC has also announced for a debt issuance programme with regard to consolidating A$300,000,000 floating rate instruments due June 2021 and A$50,000,000 fixed rate instruments due June 2026. We believe the stock would be under pressure given the ongoing market uncertainty. We give an “Expensive” recommendation on the stock at the current price of $30.19
 

WBC Daily Chart (Source: Thomson Reuter)
 
Telstra Corporation Ltd



TLS Details

Acquired HCS business assets: Telstra Corporation Ltd (ASX: TLS) has acquired HCS business assets for $4.5 million; and during the transition phase, the group would progressively take over the delivery of services to the Tasmanian Government. On the other side, TLS has completed the sale of its 47.4 percent of the total issued shares in Chinese online business, Autohome to Ping An Insurance Group for US$1.6 billion (A$2.1 billion). Meanwhile, we believe TLS stock would be under pressure due to its weak fixed voice revenues coupled with NBN rollout impact. We maintain an “Expensive” recommendation on this dividend yield stock at the current price of $5.66
 

TLS Daily Chart (Source: Thomson Reuter)
 
National Australia Bank Ltd



NAB Details

Creating Australia's largest retail superannuation fund: National Australia Bank Ltd (ASX: NAB) has merged five of its pension funds into one, to create Australia's largest retail superannuation fund, that has about A$70 billion ($53 billion) under management. The bank has also announced some structure changes (such as Business Banking becoming Business and Private Banking, introduction of a new Corporate and Institutional Banking unit, and Personal Banking transforming into Consumer Banking and Wealth Management) and executive leadership changes. Moreover, NAB plans to set up a life insurance business separate from NAB's superannuation and investments business. We maintain a “Buy” recommendation on the stock at the current price of $25.87
 

NAB Daily Chart (Source: Thomson Reuter)

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