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A lacklustre three months

THE equity portfolio that was constructed on WA-based ASX-listed companies for WA Business News had a lacklustre three-month period from June to September. The companies that make up this portfolio include Wesfarmers Limited, Woodside Petroleum, Foodland, Burswood and Dolomatrix International.

The All Ordinaries has moved from 3163.2 at the end of last financial year to 2928.3 by the end of the September quarter. This represents a reduction of approximately 7.5 per cent.

The stocks in the portfolio reduced by a comparative amount, with Wesfarmers reducing by .005 per cent, Woodside reducing by 8.7 per cent, Foodland increasing by .005 per cent, Burswood shrinking 12.8 per cent and Dolomatrix facing a reduction of 13.9 per cent. Basically, Foodland was the only stock in the portfolio to face an increase in its share price over the previous quarter.

The saving grace for the portfolio was the dividends received over the quarter. The companies that went ex-dividend over the period were Wesfarmers, Woodside, Foodland and Burswood, and thankfully all of these have paid substantial fully franked dividends.

Based on an initial investment of $100,000, the dividends received in the past quarter represented an approximate return of 2 per cent for the quarter fully franked. This was not a bad result considering, as the general market fell 7.5 per cent in the corresponding period.

This confirms the old adage that it is best to invest in companies with strong earnings history and consistent dividend payments. These are basically, companies that pay an attractive fully franked dividend are the safest and most durable investments in the share market.

These are the companies that will retain underlying value if the rest of the market turns ‘pear shaped’.

Wesfarmers is a company that has grown its dividend along with its size, and would also be considered a growth company. It is a unique animal, as most companies are either growth or income plays.

At the end of the September quarter, Wesfarmers was trading at $27.05, and at this level the company offers a 4.1 per cent fully franked dividend, with a forecast price earnings multiple of 18 times. Still fairly good value, however you are paying the higher multiple for certainty of earnings and for the expertise of management.

Foodland is still the preferred entry into the grocery sector and I would be happy to purchase more for the long term.

Woodside is suffering from an earnings drop in the coming two to three-year period, however after that the company should enjoy investor popularity again.

Burswood has a mixed outlook, with rumours of a capital raising imminent, which will keep a lid on the share price. It is currently trading at 75 cents, representing a dividend yield of 4.67 per cent fully franked, which looks like good value but I would prefer to wait for the capital raising to be out of the way. Dolomatrix is well on the way to profitablility and still remains a good long-term buy at its current levels.

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