Seven Strong Australian Dividend Payers

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 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 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 story” November 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 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.

Not only is Australia yet again officially the second the best country in the world, it’s the first to raise interest rates.

See you at parity my US friends See you real soon! This raise took AUD over 88 cents. I’ve been banging on about the short USD long AUD trade for most of this year and despite the sudden rush of people late to the party I don’t see it breaking down yet.

I love this comment “Only one of 20 economists surveyed by Bloomberg News forecast today’s move. The rest predicted no change.”

Someone better get the sheep dog out to herd that stray economist back in line. Though I imagine Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney, who forecast today’s move is having quite a celebration tonight.

Julian Robertson’s favoured currency is the local currency of the best country in the world. It would appear you don’t loose points for freezing your nuts off. Norway probably only pipped Australia by having a higher life expectancy and that’s only because they’re living in partial cryogenic suspension.

In other news I placed four orders on US markets tonight, all November covered calls, above the current offer. Let’s see if anyone living in the cough cough 13th best country bites.

There is no investment potion for this new environment other than steady income-producing bond and equity investments in companies with strong balance sheets and high dividend yields, as well as selectively chosen emerging market commitments where nominal GDP growth prospects are tilted upward as opposed to gravitating to new lower norms.

While Mr Gross didn’t actually say buy Australia can you name a country which better fits Bill’s bill?

Consider the S&P ASX 20 (top 20 companies in Australia) where the average yield is 5% and the highest is 9.6% and the balance sheets are strong.

Australia’s GDP growth prospects are tilted upward as it continues to supply the raw materials for the growing number of global consumers.

Roger Nausbaum continues to talk about doubling his Australian allocation to 6%. For a guy who invests internationally I’m surprised that he doesn’t use Interactive Brokers and restricts himself to ADRs and OTC. Though as he is managing other people’s money I am sure he has good reasons.

I continue to up our Australian allocation as I pull back from my favoured investing destination of the US. Regularly taking your Australian potion should help with some of the common side side effects of a devaluing greenback and inflation.

Want to read more of my investing in Australia cheer leading? Keep in mind I am talking long term and I am not nearly as optimistic in the short term.

First I should confess I am a half cast. I come from two generations of Australian mothers and New Zealand fathers and my life imitates theirs. Growing up in New Zealand I firmly believed Australia was a great place…except for all the Australians. As a child I rejoiced when the then Prime Minister of New Zealand, Sir Robert Muldoon, responded to a question about New Zealanders migrating to Australia by saying “Kiwis migrating to Australia raised the average IQ in both countries.”

Twenty three years on, living with an Australian gal and kids who want to play Australian Rules Football, I like the place. I quickly found Austalians weren’t that bad after all and once you’ve had a few beers even their nasal accents are no longer grating.  Australia a beautiful country and the people are relaxed and friendly.

Donald Horne in The Lucky Country said the following about Australia.

“Australia, is run mainly by second-rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise. A nation more concerned with styles of life than with achievement has managed to achieve what may be the most evenly prosperous society in the world. It has done this in a social climate largely inimical to originality and the desire for excellence (except in sport) and in which there is less and less acclamation of hard work. According to the rules, Australia has not deserved its good fortune.”

This is the lucky country and investing in Australia provides international investors a chance to sit at our table and feast on our easy bounty.

But where should international investors start looking for exposure to Australia? ETFs and ADRs are favoured by many. While both are valid options and I will discuss them,  to me that’s like walking into Japanese restaurant and only ever ordering a bento box. There is so much more on offer and in our ever shrinking world it’s pretty easy to get your hands on a wide range of delicacies.

Why Invest in Australia

The Department of Foreign Affairs and Trade, DFAT, hits most of the high notes; economic strength, a global financial services industry (more on that in a moment), democratic and stable, highly skilled workforce, 30% flat corporate tax rate and don’t forget the early bird gets the worm and we get up each day before everyone in the world (except the Kiwis, but they don’t count).

When thinking about investing in Australia most international investors first think of mining. They may be surprised to find that ”Australia’s economy is now a service-based economy, with service industries accounting for around 70 per cent of total gross value added. The finance and insurance industry is larger than the booming mining sector…”

Here’s what our Prime Minister, or Prime Nerd as he is called in my house, said in a major daily newspaper last weekend. “Australia is performing better than most other economies, with the fastest growth, the second lowest unemployment and the lowest debt and deficit of all the major advanced economies. And we remain the only advanced economy not to have gone into recession, so stuff that in your pipe and smoke it.” Yeah OK, I added that last bit, but he’s right, Australia rocks! I know some of you don’t like vague statements like ‘performing better’, so cop a look at the chart below.

Check back in a few days for more charts!

While all that’s nice, let’s be honest. The main reason you should consider investing in Australia is to diversify out of your failing empire, be that Great Britain, USA or one of those once great European nations.

Your proliferate ways have sealed your demise, so bring your money over here where the gravy train will continue for a bit longer and you can ride the mining, banking and consumption carriages all the way to the end of the line.

Let’s begin with the easiest way to buy your ticket for the Australian Gravy Train and then move on to some direct alternatives.

How To Invest In Australia

Australian Index Funds and ETFs

Pre-packaged bento box it is. Whether you’re a top investors who regularly outperforms their local bourse or an amateur, you’ll probably struggle to outperform the Australian Indices from your desk on the other side of world.

There are three Australian ETFs available from State Street Global Advisors; SFY for S&P/ASX 50 Fund, STW for S&P/ASX 200 Fund and SLF for S&P/ASX 200 Listed Property Fund. Read more.

iShares produce the MSCI Australia Index Fund (EWA).
Investors in any of these products need to be aware of the weighting of BHP and the top four banks; CBA, ANZ, NAB and WBC. Combined they make up 41% of the ETF, with BHP alone making up over 15%. For those looking for a play on the secular mining boom, then Australia is certainly the right country, but index funds like EWA only give you limited exposure to mining. With 41.5% in Financials, EWA is more a play on banking than mining which has a 26.1% weighting this ETF. Read more

(once again, more on this later – this is a working document)

American Depository Receipts (ADRs)

Here’s a full list of America Depositry Receipts (ADRs) and Pink Sheets/Over the Counter (OTC) for Australian Stocks. It’s a fairly long list, but many are thinly traded and of a more speculative nature.

Here’s the financial visualisation of Australia by Finviz.com. There is a lot more to Australian shares than represented by the image; that’s a topic for another day.

Direct Investing on the ASX

The easiest way for international investors to invest directly in Australia is to use a broker such as Interactive Brokers (IB). IB provides easy access to most international stock exchanges including the ASX. Note that IB does pass through real time data costs which are around $49/month for ASX data, IIRC. You’re probably better opting for no real time data and using delayed quotes from another source or market orders. Besides the real time data costs the transaction costs on IB are incredibly low, it is cheaper for me to use IB, to buy Australian shares, than a local online broker.

(and again more on this later)

Use the Source Luke, use the source – Key Australian Finance, Business and Economic Data

• Australian Securities Exchange is the number one place for all company filings. The site also includes good educational material and charting on Australian shares for up to 10 years.
• Australian Bureau of Statistics for all the data on the economy, housing, national accounts and more scintillating economics data.
• Reserve Bank of Australia (RBA) for Australian financial statistics, speeches, publications, research and more. Always worth browsing as this is the horses mouth. The following graph of consumer sentiment is from The Road to Recovery speech by RBA Governor Glenn Stevens.

Australian Business New Sources

• Australian Financial Review for current news.
• Business Age for more news.
• wotnews is an excellent aggregator of news on Australian companies

Before you start puking up news, lets move on to some data.

Australian Shares and Financial Data Providers

• S&P Australia and New Zealand Indices is a good source of data.
• InvestSMART Source data is always the best, but if you want a quick and dirty look at company data then InvestSMART is the best free site in Australia
• Yahoo!7 Finance

Play Safe

• Australian Securities and Investment Commission

I hope you find these sites of use. I think these are the best Australian business sites. If you think I’ve missed any sites out that should be in the top ten then please leave a comment with a link.

Thanks for reading, here’s a few bonus sites.

• The Australian’s business section is worth a read too.
• Business Spectator for good free business news from some of Australia’s leading financial writers
• Finance News Network is OK for market updates
• Daily Reckoning has some good business content, but I seldom make it this far down my bookmarks.

All sites on this list are free to use. I’ll cover paid providers of opinion, stock recommendations for investors and data in another post.

go burn me up, cause I’m on fire
and I can’t reach my desire
do you know that I’m burning up for your lovin’
you ain’t convinced that that is nothing   Ciccone Youth – Burnin’ Up

The ASX continues to power higher, climbing a wall of worry with a helpful leg up from from those looking to call a market top. Yeah the market is overbought, but the trend is your friend and you don’t want to fight your friends.

Consumer Discretionary pipped Industrials as the biggest gainer for July, followed by Materials and Telecommunication Service. Year to date Materials continue to shine, followed by Information Technology which lagged in July, with Consumer Discretionary in third place.

As our biggest gainers this year have been in health care and financials it once again goes to show that we invest in a market of stocks not a stock market.

I’ll let you judge how closely the S&P/ASX 200 sector performance aligns with sector rotation theory.

Disclosure: I am trimming my US stock and Australian share portfolios. I will continue to trim my equity positions if this rally continues. Now that’s just me and many other market participants view closing over the 200 day moving average as a signal to buy. It’s probably time I posted an update of my investometer. August calls sold on VRTX and MMM, trimmed KONG position (I know I said I’d use a trailing stop, but I really don’t have a head for heights, plus I kept half) and sold out of SSD. In Australia I’ve trimmed my bank holdings, despite them looking strong with some room to run. Financials were just becoming too large a percentage of our portfolios.
As always this is for entertainment purposes only and I hope ti gives you a good laugh.