We have recently launched the Dividend Portfolio, which is designed for income seeking investors.
While we apply our usual investment philosophy in order to find attractive investments which fit with our big picture world views, the emphasis is finding stocks which will provide healthy dividend income flows to investors. Importantly, it is not only the absolute level of dividend that we use to make our investment decision. We assess a number of factors, both qualitative and quantitative, in order to find attractive stocks that we believe should deliver above average, stable, consistent, and growing dividend flows to investors.
Factors include:
Dividend Yield. While the absolute dividend level is important, and the initial factor which we screen for, it is only one of many factors we assess when constructing a basket of dividend stocks. All else equal, the higher the dividend yield the more attractive from an income generating point of view – although importantly there may be a good reason why a company appears to be paying an inflated dividend.
Dividend Cover. In terms of a formula, it is how well a company’s annual earnings cover its dividend payments. It helps indicate how sustainable a dividend i
Dividend Growth & Stability.Once a company has the reputation of delivering reliable dividends that increase over time, it is going to work hard not to disappoint its investors. A company that pays consistent, rising dividends is also likely a financially healthy firm that generates consistent cash flow.
Imputation & franking Credits. In both Australia and NZ, there are often tax credit attached to dividends in order to avoid the double taxation of investors.
Qualitative Factors. It should be noted that consistent dividend paying companies are often stable, and their stock prices tend to be less volatile than the market in general. This also generally means the industries are more defensive – such as consumer staples or utility businesses, or often a solid dividend paying business may have monopoly type business.
Keeping this in mind 2 of our top dividend stock ideas across AU / NZ are:
Genesis Energy (GNE.NZ / GNE.AX)
Coca Cola Amatil (CCL.AX)
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