Reporting season is a revealing period for investors as they get the opportunity to compare forecasts with actual results. Given investor enthusiasm for high-yielding stocks in this low interest rate environment, one figure above nearly all else of interest to investors is the dividend.
As experienced investors will know, a list of the highest-yielding stocks based on historical payments is littered with companies that will in due course lower their dividends and thereby fall off the list. However, there are a few companies amongst that list that will manage to keep paying (roughly at least) their historic dividend and thus their stated dividend yield will remain more or less intact.
The following four companies have recently declared dividends that suggest they are trading on forward yields of over 6%. Interestingly three of the four hale from the mining services sector, which understandably has come under investor scrutiny in terms of the sustainability of dividends. While there is indeed a large number of mining service stocks which have, or shortly will, fall off the ‘high-yield list’, it looks as though these three might remain.
1) Monadelphous Group Limited’s (ASX: MND) interim dividend has been cut by just 2 cents per share (cps) to 60 cps. Assuming a final dividend in line with the interim dividend (to be conservative) means the stock is trading on a yield of 7.4%.
2) Leighton Holdings Limited (ASX: LEI) which reports on a calendar year basis has maintained its final dividend at 60 cps. Assuming it can also maintain the next interim dividend in line with the previous interim dividend of 45 cps then the stock currently has a yield of 6.1%.
3) Bradken Limited (ASX: BKN) was forced to cut its interim dividend from 20 cps last year to 15 cps this year. The FY 2013 final dividend was 18 cps, but to be conservative let’s assume a final dividend of 15 cps for FY 2014 too. On this basis the firm has a dividend yield of 6.6%.
4) K2 Asset Management Holdings Ltd (ASX: KAM) has raised its interim dividend by a whopping 5 cps to 6 cps thanks to receiving performance fees which admittedly are lumpy. It previously paid a final dividend of 4 cps. Even if half of this full-year dividend is maintainable (i.e. 5 cps) then with the share price at 76.5 cents this equates to a dividend yield of 6.5%. In reality, current shareholders are enjoying a rate far above this yield.
While history and past performance can certainly be instructive, as investors it is important to be forward not backward looking. Historic yields are just that – historic – and it is future dividend payments which count.