Suncorp Group Limited (ASX: SUN)

SUN Details

Consistent performance as committed to its shareholders: Suncorp Group Ltd.’s (ASX: SUN) stock jumped up 2.0% on February 23, 2018 at the back of positive sentiments emanating from its recent half year result and interim dividends announced for the shareholders. The company has projected healthy performance in the period and declared interim dividend of 33 cents per share to be paid in April 2018 (reflecting a pay-out ratio of 90%, which is well above historical levels). On the financial front, the company reported 15.8% fall in the reported net profit after tax (NPAT) to $452 million in 1H 2018. The profit was down due to the impact of natural hazards and the timing difference of investments which included the Business Improvement Program and increased regulatory costs. However, SUN in 1H 2018 reported strong momentum across Home and Motor Insurance and Banking. The group has indicated for better performance to be witnessed in FY19 and FY20.
 

Driving better value(Source: Company Reports)
 
The key aspect to note is that the group’s interim dividend has been historically higher, and the group commits to maintain the higher pay-out ratio for full year 2018 after which a sustainable range of 60-80% will be maintained. The group seems to be increasing its dividends again since 2016 post a drop noted in year 2015. We reiterate a “Hold” recommendation on the stock at the current price of $13.50
 

SUN Daily Chart (Source: Thomson Reuters)
 

Boral Limited (ASX: BLD)

BLD Details

Steady Growth in Dividend: BLD recently announced interim dividend of 12.5 cents to be paid in March 2018 while its 1H FY18 statutory net profit after tax has been up 13%. Based on first half yearly financial result, the company disclosed higher earnings and achieved synergies of US$18 million through acquisition in Boral North America division and is on track to exceed US$35 million of synergies in FY2018. For Boral Australia, BLD also expects a high-single digit EBITDA growth and a low double digit EBIT growth in FY 2018. Looking at historical dividend performance, we believe that the company will maintain its dividend payout ratio in the range of 50-70% in future while this might be subject to the Company’s financial performance.
 

Earnings and Dividends per share(Source: Company Reports)
 
Meanwhile, EPS was 18.2 cents and was 6.0% up as compared to 1HFY17. Interim Dividend was declared at 12.5 cents per share that was 50% franked and up by 4.0% as compared to 1H FY17. The dividend pay-out ratio was at 68% that is between 50-70% target, in-line with the Company’s Dividend Policy. Given the infrastructure industry trends and group’s potential, we recommend to “Buy” the stock at the current market price of $7.78
 

BLD Daily Chart (Source: Thomson Reuters)
 

BHP Billiton Limited (ASX: BHP)

BHP Details

Rise in Dividend despite a mixed interim result: Despite the release of a mixed half year result, BHP announced to pay an interim dividend of 55 US cents per share which includes an additional amount of 17 cents per share which is above 50% of the minimum pay-out policy of the company. This will be paid on 27 March 2018. The company announced first half yearly earnings result and revealed attributable profit of US$ 2.0 Bn, down by 37% as compared to previous year on the back of exceptional loss due to the recent US tax reform. Underlying EBITDA was US$ 11.2 Bn and EBITDA margin was 53% in 1HY 2018 because of higher commodity prices and healthy operating performance. The company had free cash flow of US$ 4.9 Bn in 1HFY18.
 

Capital Allocation Framework (Source: Company Reports)
 
Return on Capital Employed was 12.8% up as compared to 1HFY17 and a further improvement is expected in future. The company determined interim dividends amounting to US$ 2.9 Bn which included additional dividends of US$ 0.9 Bn, exceeding minimum 50% dividend pay-out policy. The company announced half yearly dividend of US$ 0.55 per share, equivalent to 72% dividend pay-out ratio. The group aims to strike a balance between the cash return and investment along with maintaining a healthy dividend policy. However, the negative productivity of US$496 million owing to Olympic Dam shut down and issues at BMA, have fuelled some negative sentiments. We have a “HOLD” recommendation at the current market price of $30.68
 

BHP Daily Chart (Source: Thomson Reuters)
 

WAM Research Ltd (ASX: WAX)

WAX Details

Fully franked dividend payment continues: WAM Research Ltd (ASX: WAX) is a listed investment company incorporated in Australia and the Fund aims to preserve capital and deliver tax-effective returns. The Fund may invest in any company listed on the ASX, however it concentrates on small to medium-sized industrial companies, focusing on strong management, above average earnings growth, but trading on low P/E multiples. The company revealed an operating profit before tax (EBIT) of $20.4 Mn and an operating profit after tax of $15.1 Mn during 1H 2018 and these were below 1H FY16.
 

Fully Franked Dividends Since Inception (Source: Company Reports)
 
On the other hand, the WAM Research investment portfolio for the six months grew by 9.8% and delivered returns with less volatility as it kept an average cash balance of 28.2%. This compares favourably to the S&P/ASX All Ordinaries Accumulation Index which rose by 9.3%. An interim dividend for six months ending 31 December 2017 of 4.75 cents per share is to be paid in 27 April 2018 with an ex-dividend date of 12 April 2018, representing an annualised fully franked dividend yield of 6.1%. The net tangible assets (NTA) per share, after adjusting for dividends, rose by 7.8% for the six months to 31 December 2017. We recommend a “Speculative Buy” at the current market price of $1.585
 

WAX Daily Chart (Source: Thomson Reuters)

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