27/08/2008 - 22:00

Sure hand hard to find

27/08/2008 - 22:00


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Investors looking for sure and steady Western Australian stocks offering capital growth and consistent dividends have limited choices.

Investors looking for sure and steady Western Australian stocks offering capital growth and consistent dividends have limited choices.

Financial advisers normally steer conservative investors towards banks and property trusts, which until this year offered the magic combination of capital growth and dividends.

There aren't many Perth-based stocks fitting that category, and the ones that do exist tend to be relatively small.

Among WA's 25 largest companies by market capitalisation, only eight are paying dividends.

The rest are mining and resources companies that either keep their profits for investment in the growth of the business or are still aspiring to develop their project.

WA's biggest industrial company, Wesfarmers, typically pays the biggest cash dividends each year.

Wesfarmers' declared dividend for the 2007-08 financial year was $2 per share, down from $2.25 per share paid in the previous year.

With Wesfarmers shares currently trading at about $32, that translates to a fairly healthy dividend yield of 6.25 per cent.

However, the downside for investors is that Wesfarmers has generated little if any share price growth over the past few years.

The end result is that Wesfarmers total shareholder return (combining capital growth plus dividends) has been minus 12 per cent for the year to June 2008 and just 4 per cent per year for the past three years.

Mineral sands miner Iluka Resources, which is one of WA's largest companies, has delivered even worse returns.

Iluka's 10 cents per share in annual dividends has done little to offset the company's sliding share price, which in turn reflects the impact of several adverse factors, including the high Australian dollar, weak commodity markets and restructuring expenses.

The end result was a one-year TSR of minus 13 per cent and a three-year TSR of minus 9 per cent.

WA's largest company, Woodside Petroleum, has a much happier story to tell.

Its annual dividend last year of $1.04 per share equated to a modest dividend yield of 1.82 per cent.

However, that was low because the company achieved strong growth in its share price, driven largely by rising oil and gas prices.

The end result for Woodside shareholders was a one-year TSR of 51 per cent and a three-year TSR of 36 per cent.

Other dividend-paying WA companies to deliver good shareholder returns last year include Straits Resources and Macmahon Holdings.

Mining company Straits delivered a one-year TSR of 50 per cent while engineering contractor Macmahon delivered a one-year TSR of 32 per cent.

Nickel miner Minara Resources and base metals miner Kagara both paid dividends in recent years after achieving bumper profits but in the past week have announced they would not be paying dividends.

Minara's profit fell to $50.9 million for the half-year to June 30 2008 from $245.9 million in the previous corresponding period.

The company attributed this to "a range of cost pressures including escalating prices of inputs such as sulphur and gas, a decline in the nickel price a very strong Australian dollar".

"As a result, the board has taken a conservative financial management approach and has not declared a dividend for the period," the company said.

Kagara reported a 28 per cent decline in net profit to $65 million for the year to June 30.

The company said that because of development commitments, including the $50 million capital expenditure remaining on its Mungana operation, a final dividend would not be paid for the 2008 financial year.


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