Should you buy these six dividend-paying biggies?

Telstra Corporation Ltd

TLS Details
New commercial terms with the strategic partner Vita group: Telstra Corporation Ltd (ASX: TLS) recently appointed Robyne Denholm as new Chief Operations Officer. The group and its strategic partner Vita group have agreed new commercial terms, according to which the remuneration structure would change. Moreover, TLS has planned $3 billion incremental capital expenditure, wherein more than $1.5 billion will be used for building networks for the future, about $1 billion in accelerating the digitization of the business and up to $500 million in other customer experience related improvements. TLS is expecting to reduce the net underlying core fixed costs by over $1 billion by FY21. Additionally, TLS in FY 16 reported 6.3% growth in revenues to $28.3 billion and a 36% growth in the net profit to $5.8 billion including $1.8 billion from sale of Autohome shares compared to FY 15. However, TLS’s outlook is ‘mid to high’ single digit revenue growth, and ‘low to mid’ single digit EBITDA growth in 2017. Despite the fact that TLS stock has fallen 11.8% in the last six months as on January 20, 2017, we believe that it is “Expensive” at the current price of – $ 5.12, given the prospects going forward.

 
TLS Daily Chart (Source: Thomson Reuters) 

Commonwealth Bank of Australia

CBA Details
Offloaded remaining stake in Visa Inc: Commonwealth Bank of Australia (ASX: CBA) has disposed the rest of their shareholding in Visa Inc. for $439 million, which would lead to an after-tax profit on sale of $278 million. Moreover, the CBA group has undertaken a review of its capitalized software assets as at December 2016. This would lead to a one-off acceleration of amortization on certain capitalized software assets, principally relating to digital and direct banking channels, totaling $275 million after tax. On the other hand, headwinds from volatile housing market in Australia may put some pressure on the bank. CBA stock has risen 9.4% in the last three months as on January 20, 2017. Still, we give an “Expensive” recommendation on the stock at the current price of – $ 81.47


CBA Daily Chart (Source: Thomson Reuters) 

Washington H. Soul Pattinson and Co. Ltd

SOL Details
Acquisition of Hunter Hall International Limited: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) has entered into an agreement to acquire 19.9% of the shares in Hunter Hall International Limited from Peter Hall, the largest shareholder. Peter Hall has been reported to have 43.95% stake in the company. For the remaining shareholding of 24.05%, Peter Hall has informed SOL that he intends to accept SOL’s offer if a superior offer does not eventuate. In FY16, the group reported for 79.3% rise in net profit after tax and the final dividend was up 3.3%. The group did suffer a profit slip from New Hope owing to low coal and oil prices. SOL stock has fallen 9.8% in the last six months as on January 20, 2017, and still trading at a high P/E. We believe that the stock is overvalued and give an “Expensive” recommendation at the current price of – $ 15.49

 
SOL Daily Chart (Source: Thomson Reuters) 

Wesfarmers Ltd

WES Details
Mixed update: Wesfarmers Ltd (ASX: WES) lately reported that the Resources business is expected to witness earnings before interest and tax (EBIT) of between $135 million and $140 million for the first half of FY17, exceeding previous guidance provided in October 2016 of a broadly breakeven EBIT for the half. However, for Curragh, there was a slip in metallurgical coal production by 14.4 per cent to 7,249,000 tonnes and steaming coal production decreased by 1.9 per cent to 3,371,000 tonnes for the 12 months to 31 December 2016.

 

Production Update (Source: Company Reports)
 
Lately, WES announced that Coles has agreed to enter into a ten-year agreement with Citi, for the distribution of Coles branded credit cards. Coles has grown its credit card portfolio for over 20 years through an ongoing focus on customer value. However, the FY16 operating cash flows of WES declined 11.2% to $3,365m due to the higher working capital investment. Despite having a decent dividend yield, the stock is trading at a very high level while we give an “Expensive” recommendation at the current price of – $ 40.97

 
WES Daily Chart (Source: Thomson Reuters) 

QBE Insurance Group Ltd

QBE Details
Issuance of Guaranteed Exchangeable Subordinated Callable Notes:QBE Insurance Group Ltd (ASX: QBE) had issued U.S. $538,608,000 worth Guaranteed Exchangeable Subordinated Callable Notes at 7.25% Fixed Rate Reset which are due 2041. The group lately appointed Pat Regan as CEO, for their Australian & New Zealand Operations, effective from March 01, 2017. But, QBE stock has risen 18.7% in the last three months as on January 20, 2017 placing them at a higher P/E. The stock slightly fell 2.3% in the last four weeks while, we maintain our “Expensive” recommendation on this dividend yield stock at the current price of – $ 12.03

 
QBE Daily Chart (Source: Thomson Reuters) 

Sydney Airport Holdings Ltd

SYD Details
Western Sydney Airport Notice of Intention: Sydney Airport Holdings Ltd (ASX: SYD) got a Notice of Intention (NOI) from the Commonwealth Government that sets out the material terms for SYD to develop and operate the Western Sydney Airport. SYD’s 12-month international growth rate was about 8.9% due to double digit capacity growth and strong load factors. The group reported international passenger growth of 7.2% in December 2016 compared to the prior corresponding period (pcp). The inbound nationalities included Indonesia (+45.6%), Japan (+29.4%), India (+13.4%), USA (+10.0%) and China (+8.5%). Australian outbound passengers recorded 4.7% growth above the pcp. In November 2016, the international passenger growth was 7.5% compared to the prior corresponding period.
 

Sydney Airport Traffic Performance for December 2016 (Source: Company Reports)
 
The domestic passenger numbers grew only 1% on a monthly basis and 3.8% on a year-to-date basis. This has continued to add to concerns over the group’s domestic growth rates. SYD stock has fallen 17.8% in the last six months as on January 20, 2017, and. We maintain an “Expensive” recommendation on the stock at the current price of – $ 5.94

 
SYD Daily Chart (Source: Thomson Reuters)

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