While Wesfarmers seems to give a good dividend yield of over 5%, the stock was under pressure last year owing to loss in market share at the back of deteriorating Coles performance despite the group designing a new strategy to focus on its Australian Food division. The latest softness highlighted for FY18 with challenging trading conditions, makes some room for evaluating other high dividend paying stocks. Two stocks of this category include -
National Australia Bank Ltd
NAB Details
Focusing on cumulative cost savings: National Australia Bank Ltd (ASX: NAB) stock has fallen 10.96% in three months as on January 22, 2018 along with other Australian Banks’ stocks with the tough environment building up in view of the government’s plans for a Royal Commission into the alleged misconduct of Australia’s banking and financial services sector. This step the government undertook to ensure that the financial system is working efficiently and effectively. On the other hand, NAB is focusing on cumulative cost savings, expected to be greater than $1 billion by 30 September 2020, as the bank is significantly simplifying and automating processes that reduce procurement and third-party costs, and enable the bank to get closer to its customers with a flatter organizational structure. Furthermore, NAB is reshaping its workforce to enable it to deliver efficiently, which is expected to give rise to a restructuring provision of $0.5-0.8 billion in the first half of the FY18. The group’s strategy initiatives are pencilled to have an earnings uplift in the long term. The support from two consecutive high quality financial year results with good loan and deposit growth and cost control, while the return on equity remains above 10%, falls in line with improving performance going forward. Further, NAB is trading at a reasonable P/E. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $29.19
.png)
NAB Daily Chart (Source: Thomson Reuters)
Telstra Corporation Ltd
TLS Details
Regaining momentum: Telstra (ASX: TLS) recently revised its guidance for FY18, which is a result of the impact of nbn co.’s announcement based on ceasing the sales on hybrid fibre co-axial (HFC) technology for six to nine months. As per the revised guidance, TLS’ FY18 total income is expected to be $27.6b to $29.5b after $0.7b reduction, EBITDA to be $10.1b to $10.6b after $0.6b reduction, and free cash flow to be $4.2b to $4.7b after $0.2b reduction at the back of the delay in nbn co.’s hybrid fibre co-axial technology and nbn’s Corporate Plan 2018.
However, the underlying operating expectations remain the same despite the intense competition and indicate the group’s ability to progress as expected. The temporary dip in nbn receipts is already factored in and the pay-out ratios now look steady for another year at least. Considering the overall challenges that the group faced in FY17, TLS expects its total dividend for FY18 to be around 22 cents per share and it will be fully franked. The latest updates have reaffirmed the confidence of the company to meet the dividend target. While the recent changes led to a reduced number of the brownfields Ready for Service premises along with a reduction of 200,000 brownfield activations expected in 2018, the nbn rollout delay is still expected to be financially positive for TLS to partially offset impact from other challenges.Looking at the overall scenario and a price slip of 13.56% in last six months (as at January 22, 2018), we recommend a “buy” on the stock at the current market price of $3.57
.png)
TLS Daily Chart (Source: Thomson Reuters)
Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.