The dawning of a new financial year offers investors a great opportunity to reassess their portfolio. Ideally this begins prior to 30 June so that any selling for tax reasons can be completed. After tax decisions are made, attention can then be turned to opportunities to improve the composition of a portfolio to maximise the expected growth and income it will provide.
While persistent tinkering with a portfolio can be excessive and unwise, the constant movement in share prices changes the relative appeal of stocks, so it is important to review your portfolio at regular intervals – here's an example of why.
One year ago Telstra Corporation Ltd (ASX: TLS) was selling for around $4.70 and paid out a total dividend for the 2013 financial year of 28 cents per share (cps). Since then the stock has gained 11% and for FY 2014 it is expected to pay a total of 29 cps in dividends.
In contrast, diversified financial services group IOOF Holdings Limited (ASX: IFL) witnessed a near 16% rise in its shares over the past financial year and in the process outperformed the 14.4% return from the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). Meanwhile its dividend payment of 42 cps in FY 2013 looks set to be well and truly eclipsed in FY 2014 with analysts' consensus (provided by Morningstar) forecasting dividends totalling 47.3 cps to be paid.
Where it gets really interesting is that IOOF's earnings and dividends are also forecast to rise over the current FY 2015 by around 9% and 13% respectively. Compare that with Telstra's expected growth of 5.3% and 0% respectively and IOOF's relative appeal looks compelling.
If both IOOF and Telstra meet consensus dividend forecasts for FY 2015 then the stocks are currently trading on fully franked forecast yields of 6% and 5.6% respectively. Given the potential for higher growth at IOOF through a combination of acquired growth and also industry tailwinds, the stock looks a relatively appealing opportunity.
