4 Stocks in Dividend Zone - WBC, TAH, WAM, AVN

Stocks’ Details

Westpac Banking Corporation

Purchase and cancellation of medium-term notes:Westpac Banking Corporation (ASX: WBC), headquartered in Sydney, Australia, is one of the initial banks established in Australia. It provides all kinds of business, consumer, and institutional banking and wealth management services. The bank is planning to launch its multi brand operating system, Customer Service Hub, and New Westpac Mortgages in 2019. It has recently purchased and cancelled 3 medium-term notes, Series 2014-1, Series 2014-2, and Series 2016-1. Besides this, the bank has notified that the distribution payment of A $1.20650 with a dividend distribution rate of 2.090% per annum for WBCPG - CAP NOTE 3-BBSW+4.90% PERP NON-CUM RED T-12-21 and it will be paid on April 01, 2019 with the record date of 22 March 2019. It has an annual dividend yield of 7.26%.


Ratio snapshot for FY18 (Source: Company Reports)

During FY18,the bank reported a net interest margin of 2.13% which has improved over the past five years and is above the industry median of 1.94%. The efficiency ratio of 43.8% has also improved over the years but is below the industry median of 52.0%. However, the bank's financial health has improved over the years and is better than the industry standards as can be seen through the Tier 1 Risk-Adjusted Capital Ratio reported at 12.78% in FY18 falling above the industry median of 11.13%.

Various hearings by the Royal Commission has led the overall banking industry to fall. But the stock has generated a positive yield of 6.99% over the past one month. Today, the stock was marginally up by 0.622% as compared to the previous close, currently trading at $25.880. With the recent purchase and cancellation of medium-term notes, new projects in the pipeline, improving and better than industry financial health, and decent P/BV multiple, we maintain our “Buy” recommendation on the stock at the current market price of $25.880.

Tabcorp Holdings Limited

Interim results to be declared in mid-Feb: Tabcorp Holdings Limited (ASX: TAH) is a gambling and entertainment service provider in Australia. The company will be declaring its half year result on 13 February 2019 and will pay the interim dividend on 13 March 2019. It has an annual dividend yield of 4.48%. For FY19, it is expected that the dividend payout ratio would be around 100% of NPAT.

FY18 Key Metrics (Source: Company Reports)

FY17 had been a difficult period for the company as it had reported higher operating expenses and had to pay a higher effective tax rate of 183.5%. During FY18, the company worked upon these factors and reported an improved Net margin of 0.7% as compared to negative margin in FY17. The top line of the company has grown at a CAGR of 17.05% over the past five years. The EBITDA margin of 20.4% is also in line with the industry median. The company also reported the return to its shareholders in a positive value during FY18 as ROE was reported at 0.7%. Further, it reported a free cash flow of $155.8 million in FY18 which has grown by 5.2x over the prior year.

The company has ~2.02 billion shares outstanding with the market cap of ~$9.45 billion and a beta of 1.02x (5Y Monthly). During the last month, the stock has generated a positive yield of 12.47% as of 24 January 2019. The stock is currently trading at the price of level $4.690 with no movement in the price during day trade on 25 January 2019. With decent and improving margins along with higher growth potential in the upcoming period and a track record of consistent dividend payment, we, therefore, maintain our “Buy” recommendation on the stock at the current market price of $4.690.
 

WAM Capital Limited

Decent Financials: WAM Capital Limited (ASX: WAM) is an investment management company with an actively managed diversified portfolio providing stream of fully franked dividends and capital growth along with preservation. As per its December 2018 investment updates, it reported Pre-tax net tangible asset of $1.75 with $1.25 billion gross assets and has outperformed 8.6% since inception.

Over the past four years,the margins of the company have improved and were reported very high. During FY18, the company reported EBITDA and Net margin of 88.7% and 66.6%, respectively as compared to the FY15 margins of 76.5% and 58.0% respectively. Similarly, the returns to its shareholders have improved over the years as it reported ROE of 9.9% in FY18 as compared to 7.7% in FY15.


3 months chart (Source: Thomson Reuters)

The company has ~713.61 million shares outstanding with the market cap of ~$1.51 billion, an annualized dividend yield of 7.38% and a beta of 0.17x (5Y Monthly). In the past one month, the stock has generated a negative yield of 1.41%. Today, the stock was down by 0.943% as compared to the previous close, currently trading at the price of level $2.100. The Relative Strength Index is seen in a positive position, and the price is currently trading close to the lower band of the Bollinger band. With decent and improving margins along with bullish indication through charts, we maintain our “Buy” recommendation on the stock at the current market price of $2.100.
 

Aventus Group

Interim results to be declared in mid-Feb: The Aventus Group (ASX: AVN) is an Australia based payday lender. Its portfolio comprises 20 centers which are valued at $1,900 million (as on 30 June 2018). The company will be declaring its 1H19 results on 14 February 2019. After the approval from ASIC, the company has changed its reporting period from 20 January 2019 to 31 December 2018 for the 1H 2019.


FY18 Financial Highlights(Source: Company reports)

During FY18, the company reported FFO per Share of $18.10. Further, it reported higher profitability margins. The company reported an EBITDA and net margins of 50.2% and 82.4% respectively in FY18. Similarly, the company is generating better returns for its shareholders than its peers as its ROE of 11.9% was above the industry median of 11.1% in FY18.

The stock is currently trading at reasonable P/E multiple of 7.750x which is below the industry median of 12.7x showing that the scrip is undervalued. Further, it reported higher than the industry dividend yield of 7.75% as compared to the industry median of 5.6%. During the last six months, the stock has declined by 5.83%. Today also, the stock was up by 1.429% as compared to the previous close, currently trading at the price of level $2.130. The stock is positioned above the Simple Moving Average (SMA) level of the Bollinger band and is a negative position of the Relative Strength Index (RSI). Meanwhile, the share price has risen 3.90% in the past three months as at 25 January 2019 and is trading slightly towards 52-week higher level. Based on foregoing, we maintain our “Speculative Buy” recommendation on the stock at the current price of $2.130.


Stock Price Comparative Chart (Source: Thomson Reuters)  
 

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