What we think about these six Dividend Stocks?

 

Coca-Cola Amatil Ltd

CCL Dividend Details
 
Strong franchise and leading market position with enriched brands:Coca-Cola Amatil Ltd (ASX: CCL) has a strong franchise and leading market position in Australia and New Zealand, supported by the strength of Coke's brands, strong customer relationships and a significant distribution network. For CY15, the Group reported total revenues of $5,093.6 million against $4,942.8 million while net profit showed impressive growth from $272.8 million to $403.4 million. Its net debt declined by $725 million to $1,146 million on account of equity infusion by TCCC in CCA’s Indonesian business and has EBIT interest coverage ratio at 7.7x. The Group has declared a final dividend of 23.5 cents, bringing the full year dividend of 43.5 cents (against 42 cents for CY2014). The management had guided single digit EBIT growth in developed market of Australia and New Zealand while developing market like Indonesia, PNG and FIJI and its business segments like Alcohol, Coffee and SPC are targeted to achieve double digit EBIT growth. The Group is planning a capex of around $300 million to develop brands and markets, along with product innovations. However, the management guidance of mid-single digit EPS growth impacted its stock prices, which fell by 6.20% during this year to date (as of April 15, 2016). On the other hand, we believe that the stock is currently trading at a reasonable P/E and has a good dividend yield. We recommend a “Hold” at the current market price of $8.63
 
 
CCL Daily Chart (Source: Thomson Reuters)
 
 

Seek Ltd

SEK Dividend Details
 
Strong financials and overseas investment to boost growth: Seek Ltd (ASX: SEK) reported impressive first half of 2016 results with sales rising 22% to $482 million and net profit of $93.4 million. After accounting gain on sale of IDP, the net profit is at $275.1 million as against $182.8 million. Seek sold entire 50% stake in IDP at gain for $181.7 million, which was used to pay its debt. In domestic market, Seek with its leading market share is well positioned to leverage growing placement market and changing business dynamics on account of shift from print to online market.
 

Cash flows and balance sheet (Source: Company reports)
 
On international front, China is the major market which grew 41% during H1FY16 while Asia region recorded 108% jump in revenues and 156% jump in EBITDA. Zhaopin with its leading market position would tap the growing Chinese market which would enhance its earning in coming years. The Group would further be benefited by its overseas investment driving growth for many years. The stock has surged 20.93% in last six months (as of April 15, 2016) and is trading at attractive P/E. Although the stock corrected by 2.02% in the last month (as at April 15, 2016), we believe investors should “Hold” this dividend yield stock at the current market price of $15.54
 
 
SEK Daily Chart (Source: Thomson Reuters)
 

Suncorp Group Ltd

SUN Dividend Details
 
Business diversification and optimization to drive future growth: Suncorp Group Ltd (ASX: SUN) is on track with Optimization program which would provide $170 million in efficiency benefits in FY18. The Group has witnessed strong customer satisfaction and retention records as the general insurance customer retention improved 0.9% and Suncorp Banks’ customer satisfaction score peaked at 90.5% in October 2015, which is highest in the market. Group’s Australian personal insurance product delivered topline growth for the first time in five halves. Suncorp Banks’s new banking platform Ignite would be completed by June 2016 expanding the market reach. For first half of 2016, the Group reported net profit after tax at $530 million, down from $631 million. Its general insurance division reported decline in profits to $297 million however its banking division reported rise in profits at $194 million. The Group declared an interim dividend of 30 cents per share. The stock offers decent dividend yield. Considering the attractive valuation, expected growth backed by various initiatives, we recommend a “Buy” at the current price of $12.39
 
 
SUN Daily Chart (Source: Thomson Reuters)
 

Insurance Australia Group Ltd 

IAG Dividend Details
 
Acquisition and capital management initiative to create value:Insurance Australia Group Ltd (ASX: IAG) is expanding business through acquisition. It had acquired AMI and Wesfarmers insurance in the past. For first half of 2016, IAG reported GWP of $5,543 million, down 1.1% while net earned premium surged 20.4%. Underlying margin improved 90 bps to 14.2%. The Group declared interim dividend of 13 cents and special dividend of 10 cents.
 
 

Gross written premium growth (Source: Company reports)
 
For FY16, the management guided flat growth in GWP and insurance margin to the lower end of 14.0 % to 16.0%. Warren Buffett’s Berkshire Hathaway owns 3.7% of IAG and Berkshire Hathaway quota share impact on underlying margin was of 250 bps. The Group has shown strong growth in Asia with proportional GWP growth of 11.7%. The Group is investing $776 million in Asia region. The stock has delivered 12.10% return in last three months (as of April 15, 2016) and we believe the stock is a “Buy” at the current market price of $5.59
 
 
IAG Daily Chart (Source: Thomson Reuters)
 

Stockland Corporation Ltd

SGP Dividend Details
 
Attractive opportunity: Stockland Corporation Ltd (ASX: SGP) reported 4.5% rise in comparable FFO to $9,188 million for commercial property.  Total MAT grew 5.5% driven by 8.1% growth in specialties. The Group managed to maintain high occupancy ratio at 99.5% and nine new anchor agreements for lease were executed during the period underpinning strong development pipeline. During the first half of 2016, the Group finished construction of three retail properties with total spend of $148 million which has stabilized yield of average 8% while three more retail properties are under construction. The Group logistic and office portfolio is also doing well with an average occupancy of 95%. Its residential portfolio has delivered higher return with increase in operating profit by 45.5% against H1FY15 and operating profit margin at 14.9% against 12% reflecting higher volume and price growth.
 

Sustainable growth in commercial property (Source: Company reports)
 
For FY16, the management expects EPS growth of 6.5% - 7.5% and FFO per security growth of 9% - 10%. It has a targeted dividend of 24.5 cents per security. The strong pipeline of projects under each category and earning guidance (although tightened) gives positive outlook for the company. This is also reflected into 13.46% (as of April 15, 2016) rise in stock price over last six months. The stock is trading at an attractive P/E and dividend yield. We recommend a “Buy” at the current price of $4.30
 
 
SGP Daily Chart (Source: Thomson Reuters)
 

Caltex Australia Ltd

CTX Dividend Details
 
Strong growth despite pressure on crude prices:Caltex Australia Ltd (ASX: CTX) reported operating profit of $628 million for CY15 as against $493 million in CY14. Its total revenue has decreased to $20 billion from $24.2 billion on account of significant fall in crude oil prices and product prices. For CY15, the average crude prices were at US$51/bbl as against US$101/bbl in CY14. The fall in expenses however expanded profit for the year, the refiner margin for CY15 improved to US$16.46/ bbl from US$12.42/bbl. The Group declared a final dividend of 70 cents per share and combined with interim dividend declared, the total dividend for CY15 was at 117 cents. Recently the Group successfully completed its $270 million off market share buy back at $29.39 per security, reflecting buyback discount of 14%. To accelerate the business growth, the Group would invest in supply chain including retail network and infrastructure, and explore low-risk adjacent business opportunity. We give a “Hold” recommendation on the stock at the current price of $32.06
 
 
CTX Daily Chart (Source: Thomson Reuters)

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