Growth brings returns for investors

THE past two and a half years have been a great time for investors in the Australian stock market, with consistent growth in the value of most listed companies.

This is reflected in the All Ordinaries Index, which tracks the value of the top 500 stocks listed on the Australian Stock Exchange.

In the year to June it rose by nearly 20 per cent to just above 4,000 points and is currently at record levels of about 4,460 points.

Western Australian companies have achieved even stronger growth. The Deloitte WA Index has risen by 43.3 per cent over the course of the financial year, valuing WA companies at $73 billion.

While it’s a good time to be invested in the stock market overall, the performance of different companies remains as varied as their business activities.

WA Business News’ annual shareholder return feature provides a detailed insight into the performance of Perth-based listed companies, using data supplied by Deloitte and Aspect Huntley.

The Deloitte data tracks the market value of all WA companies over the past five years, and finds the top performers have delivered spectacular gains.

The biggest gains have been achieved by mining companies that appear to be on the brink of a major breakthrough.

Top of the list are Fortescue Metals Group, which the entrepreneurial Andrew Forrest wants to turn into Australia’s next big iron ore miner, and Paladin Resources, which is well on the way to becoming the world’s next uranium producer at a time of booming uranium prices.

Paladin is not on its own, with several other uranium stocks, including Summit Resources and Deep Yellow, also achieving stunning share price growth over the past year, as the world has belatedly recognised a looming supply-demand imbalance.

The feature also presents data from Aspect Huntley on dividend payments during the 2004-05 financial year by WA-listed companies.

The list of dividend payers is comparatively short. Out of 500-plus listed companies based in Perth, only 80 made dividend payments last financial year.

This reflects the focus of many listed companies on early-stage exploration or technology development activities; they either don’t have the cash flow to pay dividends, or they choose to reinvest their earnings back into the business.

The top dividend payers include the likes of Wesfarmers, Foodland Associated, Woodside Petroleum, Alinta and West Australian Newspapers – strong, well established and profitable businesses.

The dividends paid by some smaller companies, such as Consolidated Minerals and Monadelphous, are not as consistently high as these ‘blue chip’ stocks, but in terms of ‘dividend yield’ they are a very attractive investment, as discussed on page 20.

The ‘sweet spot’ for investors is to invest in stocks that deliver both capital growth and consistently high dividends.