Property stocks tops for high dividend yields

The sharp fall in share values over the past fortnight has highlighted for many investors the tangible value of companies that pay regular dividends.

While Western Australia is home to about 700 listed companies, only about 60 paid dividends during the year to June 2007.

The biggest dividend payers, not surprisingly, are large well-established companies like Wesfarmers Ltd, Woodside Ltd and West Australian Newspapers Holdings Ltd, which have an assured profit flow every year.

However, the best value, on a consistent basis, has come from a range of smaller stocks, mostly in the property and financial services sectors (see table).

Their dividend payments were small in dollar terms, but relative to their share price, they equated to a very high dividend yield.

The Esplanade Property Fund, for instance, paid total dividends of just 1.2 cents last financial year, but with a share price of 20 cents, delivered a healthy dividend yield of six per cent.

Bunnings Warehouse Property Trust, which owns many of the Bunnings properties around Australia, paid total dividends of 12.8 cents, representing a yield of 5.55 per cent.

Automotive company a.i. Ltd  – which recently hived off its construction activities into a new listed company, Forge Group Ltd – delivered a very high dividend yield for the second year running.

Atlas South Sea Pearls Ltd also delivered a very high dividend yield last year, and has told shareholders they can expect better returns in the current year.

The company has forecast improved returns from its pearl farms in Indonesia, and its managing director Joseph Taylor said the board “expect to be able to deliver a higher dividend payment in 2007”.

In contrast, property developer Port Bouvard Ltd is not expected to sustain the very high dividends it paid last year.

Port Bouvard had planned during 2005 to wind-up the company; hence it started returning capital to shareholders in the form of dividends.

The company subsequently decided to resume its property activities and has a range of projects underway or in the planning phase across the state.

Managing director Ross Neumann told WA Business News the company was aiming to pay regular franked dividends and was hoping to finalise its dividend policy soon.

“We are re-building our asset portfolio but at the same time rewarding our shareholders through fully-franked dividends,” he said

Analysing dividend yields can be distorted when companies achieve rapid growth in their share price.

Land developer Peet Ltd, for instance, has increased its cash dividends since listing three years ago, paying a total of 18.5 cents last year.

Based on its share price at June 29, that equated to a dividend yield of 4.5 per cent, but for investors who bought stock at $1.20 in Peet’s IPO, their dividend yield last year was an impressive 15.4 per cent.

Mining companies are traditionally not good dividend payers, preferring to hang onto the money for development and acquisitions.

Nickel miners Minara Resources Ltd and Jubilee Mines NL are exceptions. Minara enjoyed a big jump in profit last year on the back of sharply higher nickel prices and decided to return most of the gain to shareholders.

It paid total dividends of 57.5 cents per share, up from 10 cents per share in the previous year.

Jubilee has been a more consistent dividend payer, distributing 57 cents per share last year.

Many companies place a high priority on paying consistent dividends, to reward loyal shareholders.

Automotive parts supplier Coventry Group Ltd was a prime example, paying steady dividends year-in year-out, but the pattern has been broken.

Early this month, the company was forced to admit it would not pay a final dividend because it was heading for a net loss for the year, but plans to resume dividend payments in 2007-08.

Local property developer Finbar International Ltd decided earlier this year to maintain its interim dividend, even though it incurred a loss in the December half-year.

The rationale was that Finbar’s results were affected by accounting rules and timing issues, and the company remained “cautiously optimistic” of meeting full-year projections.