PGW specialises in agricultural supplies focusing on developing farming practises, investment in on-farm infrastructure and the development of new technologies. Its current dividend yield is over 10% and with the New Zealand cash rate set to be slashed over the coming months by up to 50 basis points high dividend stocks are set to be back in vogue.
- PGW pays a dividend in excess of 10%
- Its share price remains very stable
- Strong thematics with its agriculture exposure
- Possible takeover in the works
- The diversified business management has built over the past 5 years is insulating earnings from temporary price fluctuations
PGW’s prospects are further bolstered by the chance that it is taken over in the near term. Chinese parent (Agria Corporation) already owns 50.22% of PGW. Agria Corporation notified the New York stock exchange of a non-binding takeover proposal received from its biggest shareholder Guanglin ‘‘Alan'' Lai, who also serves as the chairman of PGW. If Mr Lai is successful in his takeover of Agria Corp he will surely want to acquire the remaining shares in PGW.
At a P/E of 11x times and a dividend yield in excess of 10% its seems a no brainer
Over the medium term we believe that population growth will significantly out strip available supply in both agricultural produce and available agricultural land. The global population is predicted grow to over 9 billion by 2050 (+ 30% growth). This is in addition to the rising middle class (especially Asia) who are characterised by rising incomes, resulting in an increase in consumption and in particular a shift in dietary demands to more protein and resource intensive diets.
PGW is well positioned to benefit from these global trends with its diversified agriculture portfolio approach. In particular, PGW is focused on commercialisation of agri-technologies whereby farmers are able increase output efficiency. Furthermore, the company is committed to gaining significant exposure to both Asia (in particular China) and South America. Both are experiencing significant population growth and is expected to provide further demand benefits for PGW’s agricultural exposure.
Source :OECD Website
believes PGW offers an attractive risk reward opportunity to gain exposure to global agricultural trends. It holds a diversified portfolio which provides the business insulation from disruptions in commodity prices and adverse weather conditions. In addition its healthy dividend (+10%) which offers investors excellent income opportunities in environment where interest rates are expected to decline. In our opinion this stock offers attractive growth opportunities while simultaneously offering a substantial income stream with agricultural diversification benefits.
Source :PGW market update February 2016