2 Dividend Stocks to buy - ANZ, PGC

Australia and New Zealand Banking Group Limited

ANZ looks robust amidst challenging banking sector performance: Australia and New Zealand Banking Group Limited (ASX: ANZ) was founded in 1835 in Australia. The headquarter of the group is situated in Docklands, Australia and it is being currently headed by Mr. Shayne Cary Elliott – the Chief Executive Officer (CEO) and Executive Director. The company provides banking and financial products and services to approximately eight million individual and business customers. The company operates across 34 markets. The business of the company ranges across divisions Australia, Institutional, New Zealand, Wealth Australia, Asia-Retail & Pacific. On the financial metric front, statutory profit after tax from continuing operations for the year ended 30 September 2018 increased 12% on the prior year to $7,095 million. Statutory return on equity from continuing operations is 12.0%, and statutory earnings per share from continuing operations is 245.6 cents, an increase of 13% on prior year. The table below presents the company performance on a statutory and cash basis.


FY18 P&L Statement (Source: Company Reports)

•The cash profit from continuing operations decreased by $322 million a decrease of 5% Y-O-Y compared to FY 2017.

•Net interest income decreased by $361 million (-2%) Y-O-Y, primarily due to a decrease in the net interest margin.

• Other operating income decreased $241 million (-5%), partially offset by a $335 million impact from divestments.

•Operating expenses increased by $281 million (3%) primarily due to incremental exceptional charges.

• Average interest earning assets increased $26.9 billion (4%) reflecting ANZ’s strategic focus on home loans, in particular owner occupier, growth in liquid assets, partially offset by the completion of the Asia Retail and Wealth businesses sale.

• The Average deposits and other borrowings increased by $12.5 billion (2%). This is due to growth in customer deposits.

•  Net loans and advances increased by $29.6 billion (5%) as home loans grew across Australia and New Zealand.

On the other hand, for FY18, the tier 1 common equity capital stood at 11.4% as compared to 10.6% in FY 2017. The ROA, however, remained stable over the last five-year term. The cost to income ratio has significantly increased to 51.6% for FY 2018.

Meanwhile, the share price has fallen 5.34% in the past six months (as of December 14, 2018) and is trading at PE multiple of 11.19x with an annual dividend yield of 6.45%. However, with the strong operating fundamentals and significant challenges that the company faced in FY 2018, it has given a credible result in FY 2018. Even with a marginal decrease in operating income and net interest income, the company is poised to grow in the long-term, and with its stock trading nearly at its 52-week low, it is a good opportunity to invest and enter the stock for a long-term perspective. Hence, we maintain our “Buy” recommendation on the stock at the current market price of $24.410 (down 1.573% on December 17, 2018).
 

Paragon Care Limited

Strong Fundamentals:Paragon Care Limited (ASX: PGC) is into healthcare business. It has a history of strategically acquiring reputed companies. These companies are generally the largest providers of innovative healthcare equipment. The company operates in diversified business segments including aged care, hospital and acute care, primary care, eye care, storage solutions, diagnostics, service and technology management, and e-health. Moreover, the company has an extensive project management scope and comprehensive service and maintenance capability. On the financial front, the revenue of the company grew approximately 16% and stood at $136.7 million in FY 2018 as compared to FY 2017. The net profit for the company increased by approximately 7.0% in FY18 over the prior year. The total assets increased by around 1.10 times to $349.74 million. The cash flow operations decreased significantly by almost 58%. This was however due to an increase in payments to suppliers and employees.  The cash & cash equivalents also increased significantly compared to FY 2017.


Key Financial Metrics (Source: Company Reports)

The company had a year of strategic acquisitions and transformations. It continued to increase its geographic presence with operations in South Australia. The organic growth for the existing products has continued this year due to increased penetration into health and age care sectors. Going forward, the company will attempt to secure investments and business those are complementary to its existing operations. The company has a dividend reinvestment plan which will enable its shareholders to choose to reinvest all or up-to a portion of their dividends into additional shares in Paragon. Meanwhile, the stock has fallen 27.27% in the past six months as at December 14, 2018 and is trading at the lower level. Based on foregoing and current trading scenario, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $0.635.
 

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