Stocks’ Details

With many investors looking for opportunities that are outside the Australian major banking groups in view of the Royal Commission playing a big role in weighing over the majors, below are seven dividend stocks that look attractive:

Australian Finance Group Ltd (ASX: AFG)

Strategic Agreement with Thinktank: The group has recently entered into a binding agreement to make a strategic investment of 30.4% (fully diluted) of Thinktank Group Pty Ltd for $10.9 Mn in cash consideration.This strategic deal reflects the next evolutionary step for AFG to diversify its earnings base. In relation with investment, the group will distribute a white label commercial property product via its network of brokers. Further, AFG has the right to appoint two directors to the Thinktank board and they will take up those positions immediately. On the financial front, the group recorded NPAT growth of 11% to $14.4 Mn in 1HFY18 as compared to previous corresponding period.Return on equity (RoE) increased 30bps to 15.2% during the same period as compared to previous corresponding period. Based on the strong first half-year performance, the Board of Directors declared fully franked interim dividend and special dividend of 4.7 cents per share and 12.0 cents per share, respectively which was paid on March 29, 2018, representing dividend rise (excluding special dividend) of 11.9% as compared to the previous corresponding period. Looking at historical dividend performance, the company is expected to maintain its dividend policy in the range of 70%-80% of underlying (cash) profits going forward. Meanwhile, AFG stock has risen 18.22 per cent in the past one year but down by 20.83 per cent in the past three months as at June 13, 2018. The stock is above its 52-week low level ($1.083), and, we give a “Buy” recommendation on the stock at the current price of $ 1.340, considering the strategic acquisitions and other movements.

 
Dividend Performance (Source: Company Reports)
 

Dicker Data Limited (ASX: DDR)

Robust Clientele Base: Dicker Data Limited (ASX: DDR) is Australia and New Zealand’s largest independent distributor of IT hardware with a network of more than 5,000 resellers. The Group enjoys long-lasting relationships with its marquee clients in the domestic market which helps to facilitate the growth of the company.  The group has a customer-centric approach which allows shifting with changing market conditions for proactive reseller engagement and the dynamic ability. The group's product portfolio consists of leading technology business partners including HP, Cisco, Toshiba, ASUS, Lenovo, Microsoft and other tier 1 global brands. DDR has enjoyed continuous growth despite the current economic climate. The group plans to continue its growth through proactive business partners and expanding upon the success experienced with existing competitive strategies. During the first half, the revenue increased by 10.2 per cent which was ahead of the company guidance. The group recorded revenue growth at a CAGR of 10.1% over FY15 to FY17 and is expecting 6.3% growth for the full-year from the previous year.


Financial Trend - Full Year (Source: Company Reports)

Recently, the Group issued 56,780 shares for a purchase price of $2.9154 per share under the DDR’s Distribution Reinvestment Plan for a dividend paid for the period ended 31 December 2018. Based on the historical dividend performance, the company advised to its investors that it intends to continue its dividend payment policy by paying quarterly basis. This would bring total proposed dividend to 18 cents per share for the full-year, representing dividend rise of 9.8% as compared to previous year. In the last one year, the stock rose 26.18 per cent and is trading towards its 52-week highest level ($ 3.240). Hence, we maintain our “Hold” recommendation on the stock at the current price of $ 2.970.
 

Crown Resorts Limited (ASX: CWN)

Buy-Back of Subordinate Notes: Crown Resorts Limited (ASX: CWN) may not be a very high dividend payer while a yield of 4.48% looks interesting given the booming travel and tourism landscape in Australia. CWN has recently announced interest payment of AUD 1.53 with interest rate of 6.068100% per annum for certain hybrid notes. It will be paid on September 14, 2018 with the record date of September 06, 2018. Moreover, the group also disclosed its interest payment of AUD 1.78 with interest rate of 7.068100 % per annum for hybrid notes to be paid on September 14, 2018 with same record date. Lately, the group updated the market about the buy-back of the outstanding Subordinated Notes that were listed on ASX. It reported that as at 08 June 2018, a cumulative total of 1,342,270 of Notes were bought back and about 3,977,430 of Notes were still outstanding which still have not been bought back. The board of director declared an interim dividend of 30 cents per share (franked at 60 per cent) which was paid on April 04, 2018. Meanwhile, the stock climbed up 7.13 per cent in the past six months as at June 13, 2018 and currently trading near its 52-week high level ($13.880) with a decent 1HFY18 performance. Hence, we maintain our “Hold” recommendation on the stock at the current price of $13.250, considering its ongoing debt reduction strategy which will help to expand its bottom line in future.


Debt Structure (Source: Company Reports)
 

WAM Research Limited (ASX: WAX)

Rising Investment Performance in May Month: WAM Research Limited (ASX: WAX) has recently released its investment update for May 2018. According to the release, the investment portfolio grew by 2.4% and delivered returns with less volatility as it kept an average cash balance of 35.9%. This compares favourably to the S&P/ASX All Ordinaries Accumulation Index which rose by 1.4%. Besides this, the Board is committed to paying an increasing stream of fully franked dividends to shareholders, provided the company has sufficient profit reserves and franking credits and it is within prudent business practices. The company’s ability to generate franking credits is dependent upon the receipt of franked dividends from investments and the payment of tax. Since inception, WAM Research has paid 89.9 cents per share in fully franked dividends to shareholders.


Fully Franked Dividend Since Inception (Source: Company Reports)

Meanwhile, Wilson Asset Management group ceased to be the substantial holder of the Group since 08 June 2018.The stock has been down by 2.87 per cent in last three months owing to more volatility around the global market but recovered in last one month and climbed up by 2.69 per cent as at June 13, 2018. Hence, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $ 1.510, considering robust fundamentals along with an implied well-versed strategy to invest into the market resulting into the high return from undervalued growth companies.
 

Aventus Retail Property Fund (ASX: AVN)

FY18 FFO per unit higher than previous year:Aventus Retail Property Fund (ASX: AVN) expects FY18 Funds from Operations (FFO) per unit to be 2% to 3% which is higher than FY17 FFO per unit. The group focuses on to improve its portfolio growing along with the development pipeline which will continue to drive investor returns and long-term growth. We expect that the group will continue to explore opportunities to take advantage of a fragmented ownership sector. During the first half of the year, distributions per unit were 8.1 cents per unit. This represents a payout ratio of 90% of FFO, within the Fund’s distribution policy of 90% - 100% of FFO.


Historical Distribution Performance (Source: Company Reports)

Recently, the Group issued 513,199 new shares for a purchase price of $2.18 per share under its Distribution Reinvestment Plan. AVN stock has fallen 5.98% in the past six months as on June 13, 2018 and is trading at a lowest PE level (5.76x) among its peer group. Based on the FY18 projection, we give a “Speculative Buy” recommendation on the stock at the current price of $2.220.
 

Kathmandu Holdings Limited (ASX: KMD)

Robust 1HFY18 Performance: Kathmandu Holdings Limited (ASX: KMD) posted a strong set of results as the sales grew by 4.3% to $ 204.8 Mn in 1HFY18 as against of prior corresponding period. NPAT has shown remarkable growth of 23% to $12.3 Mn as against of $10 Mn in 1HFY17. Besides this, RoE and ROIC stood at 3.8% and 3.3% in 1HFY18, representing the rise of 60 bps and 70 bps, respectively as compared to previous corresponding period. Debt to Equity ratio substantially reduced to 0.06x in 1HFY18 from 0.17x in 1HFY17. As a result, the Board of Directors declared fully franked interim dividend of NZ$ 4.0 cents per share which is in-line with the previous corresponding period. It will be paid on June 22, 2018 with the record of June 08, 2018. The dividend will be fully franked for Australian shareholders. The interim dividend will not be imputed for New Zealand shareholders. The final dividend is expected to be fully franked and fully imputed.


Historical Dividend Trend (Source: Company Reports)

On the other hand, the group has agreed to acquire US-based Oboz Footwear LLC for a base cash consideration of US$60 million and earn-out of up to US$15 million. The objective of this deal is to expand its footprint into North America regions via Oboz distribution channel. Hence, we continue to maintain our positive outlook on KMD at the back of strategic initiation to strengthen Kathmandu brand and customer engagement, focus on cost optimization strategy, and synergetic benefits from Oboz acquisition. We give a “Buy” recommendation on the stock at the current price of 2.280 (up 1.33% on June 14, 2018).
 

Spark Infrastructure Group (ASX: SKI)

Focus on Long-Term, Low-Risk and Value Creation Strategy: The group focuses on long-term, low risk, and value creation profile at the back of efforts to improve efficiency across the networks. The Board of Directors reaffirmed its distribution guidance of 16.0 cps for FY18, representing annual growth of 4.9% on FY17, which is subject to business conditions. Meanwhile, the stock was down by 16.79 per cent in the past six months as at June13, 2018 and is trading currently close to 52-week low level ($2.125). The downtrend found support from investors’ concerns over Spark paying cash tax soon, while its key assets do have regulatory certainty until 2020. We maintain our “Buy” recommendation on the stock at the current price of $2.270 (up 1.8% on June 14, 2018), we justify our recommendation at the back of robust network base, strong fundamentals, continuous dividend payment, improving return ratio, and high entry barrier business due to high regulatory policy issues.


Distribution per Security - cps and % growth (Source: Company Reports)

 
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