Four mid-cap dividend stocks to hold

Fortescue Metals Group Ltd

FMG Dividend Details
 
More than estimated cost reductions: Fortescue Metals Group Ltd (ASX: FMG) was able to decrease its C1 costs by 47% to US$16.34/wmt during first half of 2016 as compared to the prior corresponding period (pcp). This decrease had offset the iron ore prices pressure to a certain extent which otherwise led the group’s revenues falling to US$3.34 billion during the period.
 

Underlying EBITDA, first half of 2016 performance (Source: Company Reports)
 
Accordingly, net profit after tax and underlying EBITDA decreased to US$319 million and US$1,301 million respectively against US$331 million and US$1,440 million in the pcp. But the group’s record operational performance led to the ongoing debt repayment, wherein FMG repaid US$1.1 billion of debt which consequently decreased the net debt to US$6.1 billion and has US$2.3 billion of cash as of December 2015. The group shipped 84 million tonnes for first half of 2016 and is on track to achieve the forecasted annual production rate of 165mt for FY16. Net cash flow from operating activities enhanced to US$1,388 during the period as compared to US$ 905 million in first half of 2014. As a result, the group’s stock surged over 31.58% in the last four weeks (as of February 24, 2016) and we believe the stock is still trading at reasonable valuations. Based on the foregoing, we recommend investors to “HOLD” this dividend yield stock at the current price of  $2.07
 
 
FMG Daily Chart (Source: Thomson Reuters)
 

Medibank Private Ltd

MPL Dividend Details
 
Ongoing focus on health benefit claims management: Medibank Private Ltd (ASX: MPL) reported an outstanding Health Insurance operating profit rise by 58.8% to $271.7 million in the first half of 2016 driven by its ongoing focus on health benefit claims management and accordingly the gross margin enhanced to 17.2% during the period against 13.9% in pcp. MPL’s Complementary Services also improved its operating profit by 27.8% yoy to $9.2 million due to changes and divestments on the back of the group’s strategic review efforts. But Management expense ratio rose by 8.4% during the first half of 2016 against 8.1% in pcp.
 

Health Insurance operating profit performance (Source: Company Reports)
 
However, the group reported a Health Insurance premium revenue rise by 4.6% yoy to $3,080 million during the period. MPL also declared a fully franked interim dividend of 5.0 cents per share. Net profit after tax surged by 58.3% yoy to $227.6 million in the first half of 2016. MPL stock rallied over 13.18% during this year to date (as of February 24, 2016) and we believe that the stock could rally further in the coming months. Accordingly, we recommend investors to “HOLD” this dividend yield stock at the current price of  $2.53
 
 
MPL Daily Chart (Source: Thomson Reuters)
 

Caltex Australia Ltd

CTX Dividend Details
 
Strong replacement cost operating profit after tax growth: Caltex Australia Ltd (ASX: CTX) reported a strong replacement cost operating profit after tax (RCOP) rise to $628 million during fiscal year of 2015 (excluding significant items) as compared to the $493 million in the prior corresponding period. The group delivered a solid Lytton refinery operational performance and reported an EBIT contribution of $406 million as compared to the $218 million in 2014. CTX realized Caltex Refiner Margin (CRM) reached an average of US$16.46/bbl as compared to the US$12.42/bbl in the pcp.
 

Delivered record HCOP performance during the fiscal year of 2015 (Source: Company Reports)
 
Caltex decreased its net debt to $432 million in fiscal year of 2015 against the $639 million as at December 2014 and declared a final dividend of 70 cents per share (fully franked) leading to a total dividend of 117 cps, which is an increase by 67% against pcp. Meanwhile, CTX stock rallied over 20.02% in the last six months (as of February 24, 2016) and we believe that the stock has more potential to rise further driven by its $270 million off-market buy-back program. Hence, we give a “HOLD” on the stock at the current price of  $36.05
 
 
CTX Daily Chart (Source: Thomson Reuters)
 

Iluka Resources Ltd

ILU Dividend Details
 
Enhanced volumes to offset pricing pressure: The shares of Iluka Resources Ltd (ASX: ILU) surged 14.61% (as of February 24, 2016) in just last four weeks as the group was able to improve its volumes by controlling costs to offset the ongoing commodity prices turmoil. ILU delivered a sales revenue rise for zircon, rutile, and synthetic rutile (Z/R/SR) by 17% yoy to $740 million in FY15 while sales volumes rose by 6% to 651 kt and overall annual production increased to 690 thousand tonnes (kt) during the period. Despite delivering such volumes, ILU was able to cut its unit cash costs for Z/R/SR production by 17% during the year to $558/tonne against $668/tonne in 2014. The group is enhancing its free cash flow by decreasing its capital expenditure while maintaining its EBITDA margin at >30%. Falling Australian dollar, coupled with the group’s pipeline development and ongoing cost control might drive the stock further in the coming months. Accordingly, we recommend investors to “HOLD” this dividend yield stock at the current price of  $6.63
 
 
ILU Daily Chart (Source: Thomson Reuters)

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