27/08/2009 - 00:00

Dividends suffer as GFC starts to bite

27/08/2009 - 00:00


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THE global financial downturn has had a dramatic impact on the dividend yields of those Western Australian stocks that still pay regular dividends.

Dividends suffer as GFC starts to bite

THE global financial downturn has had a dramatic impact on the dividend yields of those Western Australian stocks that still pay regular dividends.

According to data collated by Morningstar for WA Business News' annual survey of Total Shareholder Returns, just fewer than 80 listed WA companies paid dividends during the 2008-09 year.

While it is true that many companies have begun scaling back or cancelling distributions in response to the changed market conditions, the corresponding fall in most share prices has artificially inflated yields on payouts last financial year.

Based on share prices at the time of collation in mid August, the yield on shares in troubled Perth property developer Aspen Group was 43.75 per cent, reflecting its prior annualised distribution rate of 15.5 cents per share versus a then share price of 35 cents.

But as reflected by its TSR of negative 67 per cent for the year, Aspen has had a particularly tough time, with the credit squeeze hampering efforts to refinance debt held by its diversified property fund, and asset revaluations resulting in a $42 million loss for the December half.

Consequently, Aspen said it would cut the annualised distribution rate to 10 cents per share, which, based on its current share price of about 32 cents, would trim the yield to 31 per cent.

LinQ Resources Fund also boasted a 32.6 per cent dividend yield at the same time as posting a one-year TSR of negative 59 per cent, while pearl farmer Atlas South Sea Peal had a yield of 22 per cent versus a negative TSR of 75.6 per cent.

Similarly, engineering group VDM Group had a yield of 17.2 per cent and a TSR of negative 85 per cent for the year.

Yet traditional big dividend payers still maintained attractive yields that also reflected their underlying business performance.

Wesfarmers, which had a negative TSR of 31.4 per cent, had a yield of 5.84 per cent, slightly better than West Australian Newspapers yield of 5.22 per cent.

The outlook is also promising for investors seeking both reasonable yields and capital growth as the market recovers, particularly for stocks with exposure to key growth industries such as LNG.

Oil and gas engineering group Clough finished the year with a yield of just 1.14 per cent, but it last week doubled its dividend to 2 cents per share on the back of its improving financial performance. Its yield is currently 2.14 per cent, even though its shares have risen 12 per cent since early August.

Fellow engineering group Monadelphous, which had a yield of 6.48 per cent for last year, also raised its final dividend by 1 cent after a big lift in annual profits, taking its full year distribution to 74 cents per share.

But a big rise in its share price this month has seen its effective yield reduced to around 5.6 per cent.


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