3 Dividend Stocks To buy
The current low interest rate environment makes it difficult for investors to spot and identify dividend stocks which can be bought for the return and be held in in the long term. Here, we describe three stocks that we like which you should consider seriously and, in our opinion, buy because they meet our criteria for long-term income stocks.
Flight Centre Travel Group Ltd
In a recent development, the company has announced that it has won its legal battle in the long-running competition law test case initiated by the ACCC. The Full Court of the Federal Court of Australia has overturned the judgement against the company handed down in December 2013 relating to breaches of the Trade Practices Act 1974. In addition, the ACCC has been ordered to pay the company's legal costs for both the initial case and the subsequent appeal. Company Managing Director Graham Turner said that the company has always sought to provide cheaper airfares to the travelling public and was not in the business of making airfares costlier. The company will receive the $ 11 million plus interest by way of penalties and the sum included in the FY 2016 financial results. However, the amount is not particularly significant and the more important implication is that the company can continue to do business as in the past without a legal threat hanging over its head.
FLT EBIT (Source - Company Reports)
The company has also announced that it has completed the acquisition of the corporate travel business in Mexico, Koch Oversees de Mexico. The price has not been disclosed but neither the price and the business profits are not material for the company.
The company has also released an update on its outlook for fiscal year 2014/2015 and the underlying PBT ( profit before tax) for the 12 months to 30 June 2015 is expected to be between $ 355 million and $ 365 million. The midpoint of $ 360 million is at the bottom of the company's range targeted for the full year and is 4.4% lower than the record profit achieved in better trading conditions during the previous year. The actual (statutory) PBT during the previous year was $ 323.8 million. The other highlights include record total transaction values in all 10 global businesses, robust growth in overseas profits the UK, the USA, Singapore and South Africa on track to deliver record earnings before interest and tax. The year-end record cash balance is expected to be more than $ 500 million and there will be continued investment in the sales network, people and platforms. Important factors include a reduction in gross margins and revenue as a result of discounting by consultants to stimulate leisure demand during the first half and competitive pricing in the corporate travel market. However, margins at the Flight Centre are recovering to levels near the previous year. The higher costs related to the wage change implemented in 2014, and ongoing investment in marketing and systems as part of the transformation from travel agents to proprietary retailing. Sales growth was slower than the past turnover from the Australian leisure business slowing to 2.7% compared to a compound annual growth of 8.5% over the past five years.
FLT Daily Chart (Source - Thomson Reuters)
The company is one of the largest travel agency in the world approximately percent of earnings and 80% of profits being generated by the Australian market. It is financially strong with a large cash holding and the fully franked dividend represents an attractive dividend yield in excess of 4%. In addition, there is room for an upside on the current stock price and we would recommend a Buy.
WAM Capital Ltd
This is a listed investment company which means shareholders capital is used to make investments like equities and fixed income instruments which generate returns by way of income and capital gains. It is the largest and best performing Wilson Asset Management fund and has provided a return of 17.8% annually since its inception and has outperformed the S&P/ASX All Ordinaries Accumulation Index by a handsome 9.5% during this period.
WAM Dividend History (Source - Company Reports)
The company has gross assets of $ 833.5 million and a market capitalisation of around $ 866 million which means it trades at a premium of around 9% to the underlying net asset value. The fully franked interim dividend on an annualised basis for FY 2015 was $ .14 a share producing a dividend yield in excess of 7%. The performance as on 30 June 2015 showed a one-month performance of -1.6%, a six-month performance of 7.7% and a one-year performance of 14.6% compared to figures of -5.4%, 3.3% and 5.7% for the S&P/ASX All Ordinaries Accumulation Index respectively reflecting an outperformance of 3.8%, 4.8% and 8.9% respectively. The performance metrics have been calculated before expenses, fees and taxes. The Net Tangible Assets (NTA) before tax came to 181.18 cents per share, NTA after tax but before tax on unrealised gains was 182.13 cents per share and NTA after tax was 178 .24 cents per share.
WAM Daily Chart (Source - Company Reports)
The company’s market overview of June 2015 notes that the S&P/ASX All Ordinaries Accumulation Index was down 5.4% in June resulting in a below average return for the financial year of 6%. The index was impacted by a four in the prices of iron ore and oil, earnings downgrades and the global uncertainty resulting from the ongoing Greek crisis. The Australian market has declined 8% since the high in late April and the company believes that it is approaching a technical correction. International equity markets were very volatile as the troubles in the Eurozone led to a global sell-off in equities. Greece failed reach agreement with the IMF and the European union before the deadline of 30 June 2015 and became the first of the developed countries to default on an IMF loan. The FTSE 100 lost 6.7% while the German DAX was down by 4.1%. In the US, the S&P 500 and the Dow Jones fell by 2.1% and 2.2% respectively. Despite this weakness, the company believes that equity valuations remain full but it is well poised to take advantage of opportunities as they arise because of its superior cash levels.
The company has a solid dividend track record and the performance speaks volumes about the quality of management of the portfolio. With this low interest rate environment, a dividend yield of more than 7% is highly attractive and there are chances of further gains from the upside in the stock price. We have no hesitation in recommending a Buy.
Automotive Group Holdings Ltd
The company is Australia's largest automotive retail as well as the largest provider of refrigerated transport and
cold storage. Its businesses include a mature auto-parts business as well as the import and distribution of KTM and Husqvarna motorcycles. The FY 2014 group revenues came to $ 4.7 billion and the employees number 7500 across Australia and New Zealand. The company has a strong balance sheet and commercial debt facilities as on 31 December 2014 were $ 286 million with an undrawn balance of $ 56 million. Cash and cash equivalents came to $ 79 million making a funding capacity of $ 135 million. The total net debt was $ 788.4 million and net debt plus equity (Floorplan Finance) was $ 911.8 million. The competitive advantages of the company include representation of 22 passenger brands in Australia including 9 of the top 10, 9 truck brands, state-of-the-art facilities and long-term partnerships.
Sustained Growth (Source - company Reports)
It has a strong retail culture and performance and sells more than 100,000 vehicles every year while writing more than $ 1 billion in auto finance annually. It has a large service database with almost 800,000 repair orders in FY 2014. The customer lifetime services cycle covers service, tyres and batteries and it is widely recognised for its industry leading systems and processes. It is the largest refrigerated logistics supplier in the country and supplies to national manufacturers and major retailers among others. It has an impressive capacity for road and rail transport with 459 prime movers and rigids, 1013 road trailers, 464 rail containers and a major network of 300 subcontractors.
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