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Strong Australian Dividend Stocks

October 14, 2009 11:32 am by Dean Morel

Australian companies traditionally pay high dividends due to tax laws which make dividends attractive to investors. The following seven companies yield between 3.3% and 8.8% on trailing dividends and 5-12% based on their previous high annual dividends.

Seven Strong Australian Dividend Payers

Ticker Yield Cover 5yr Div CAGR 10Yr Div CAGR Div (TTM) Max Div Yield EPS P/E
ANZ 4.9% 1.42 10.9% 8.4% 1.20 1.36 5.6% 1.29 19
TLS 8.8% 1.18 5.0% 1.5% 0.28 0.28 8.8% 0.33 9.6
WBC 4.9% 1.35 13.1% 12.7% 1.28 1.42 5.5% 1.63 16
NAB 5.5% 1.55 6.3% 3.5% 1.70 1.94 6.3% 2.4 13.2
CBA 4.3% 1.44 6.4% 4.5% 2.28 2.66 5.1% 3.14 16.9
MQG 3.3% 1.67 8.7% 8.9%* 1.85 3.45 6.2% 3.09 18.6
HHL 6.9% 0.64 3.8% 29.5%* 0.45 0.77 11.9% 0.26 25.2

ANZ Banking Group Ltd

ANZ Dividend History

Is currently my largest bank holding and my favourite to bank with. They have a strong strategy for Asian expansion and a management team who appear capable of delivering that strategy.
Telstra Corp Graph

Telstra Corporation Ltd

TLS Dividend History

Telstra is the leading Australian Telco and the best brand in Australia. The current 8.8% dividend is only just covered by earnings, but thanks to a major transformation project earnings are set to increase for the next couple years at least. I previously covered Telstra’s dividend history and valuation and called it a good buy at similar prices in June and March.

The opportunity to buy a this stalwart at discount prices has arisen due to regulatory uncertainty and now the threat of structural separation of Telstra’s wholesale and retail divisions.

Westpac Chart [Click to Enlarge]Westpac Banking Corp

WBC Dividend History

Westpac has the second best 10 year and best five year dividend growth history of the group. Like all the banks I view it as fairly valued at current prices, but with greater potential upside than downside surprise over the near term.

Westpac was the strongest bank coming in to the recession we didn’t have, but I’m not sure they capitalised on that as much as they could have.

National Australia Bank Ltd

NAB Dividend History

Apart from my general sentiment on banks, I know little about NAB. Except they always seem to be throwing money away on atrocious overseas acquisitions.

Commonwealth Bank of Australia

CBA Dividend History

I don’t follow them, but they certainly appear to have taken excellent advantage of the financial crises.

Macquarie Group Ltd

MQG Dividend History

I’m sure some fellow investors mocked me for buying Macquarie, but as they say he who laughs last laughs loudest. I bought MQG on a very simple premise. “The strong often prosper at these times and with the loss of some high profile competition, MQG are selling themselves as a strong survivor. I’ve bought the storyNovember 2008

Macquarie Group is too complicated for me to get a good handle on, consequently I started selling down our position in the forties. Management appear to be doing an excellent job of positioning the company for future growth and I would not bet against them.

Hunter Hall Limited chart [Click to Enlarge]Hunter Hall International Ltd

I would have liked to buy more of HHL back in June, but I was discouraged by the wide spread due to HHL being so thinly traded. I originally compared Hunter Hall to Platinum Asset Management, the darling of the Australian funds management industry,back in June. Taking dividends into account the returns have been similar since then. I haven’t updated by figures, but am prepared to take an educated guess that HHL still trades at a large valuation discount to PTM.

I covered HHL’s dividends and AUM in June and their 2009 results in August.

HHL Dividend History

What to Buy

Yeah right, as if I’d tell you that, but I will comment on what I might do, though don’t hold me to it as I’m like a willow blowing in the wind. Telstra and Hunter Hall are the only two I would consider buying at current prices, but have no plans to buy either due to current long position in both. If this rally continue ANZ is high on my list of Australia stocks to trim back on, primarily due to my position size rather than its comparative merits.

Please keep in mind I speak of what works for me. The  most important factor in investing success is knowing what works for you. Scores of commentators are prepared to tell you how to invest, that their way is the right and perhaps only way. They speak in black and white terms of certainty. One of the few things I am certain of is that there are scores of way to make money via investing, but you never will unless you know yourself and which style best fits you.

Disclosure: Small long positions in WBC and MQG, Long TLS, HHL and ANZ.

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