Despite interest rates on term deposits and savings accounts falling to record lows, the share prices of a number of prominent Australian blue chip stocks, which pay big dividends, have failed to impress investors throughout 2014.
Excluding dividends, shares of Coca-Cola Amatil Ltd (ASX: CCL), Woolworths Limited (ASX: WOW) and Australia and New Zealand Banking Group (ASX: ANZ) have been unable to break even.
Since 2 January 2014, their share prices have fallen 25%, 6% and 1.2%, respectively. That's despite the S&P/ASX 200 (INDEX^: AXJO) (ASX: XJO) trending marginally higher.
Investors are likely questioning whether now is, or isn't, the right time to buy these dividend darlings. Here's what you need to know.
Coca-Cola Amatil
Early in 2014 CCA's share price was hit hard (it fell nearly 15% in a single day of trading during April) when it became apparent the beverage bottler and distributor would be unable meet its own profit guidance. It was the biggest share price drop CCA had experienced in 23 years.
It claimed higher levels of competition from the two supermarket giants and poor consumer confidence were eroding margins and hindering top line growth. In addition, CCA's Indonesian operations – the company's key growth market – were chalking up lacklustre results, driven by an EBIT margin of just 1.2%.
However after months of its share price trending downwards, it finally seems CEO Alison Watkins is steering the ship to greener pastures. With a $500 million injection of capital from parent The Coca-Cola Company and an operational review expected to return the group to sustainable earnings per share growth in the medium term, the company's depressed share price could be a sound opportunity for savvy long-term investors.
Woolworths
In recent times, Woolworths, along with rival Wesfarmers Ltd (ASX: WES), has been able to throw its weight around and drive its own profit margins higher, at the expense of their suppliers. However, it now appears the supermarket giant is facing big challenges of its own.
Indeed in the grocery channel, competition from foreign rivals such as Aldi and Costco is beginning to become concerning for both Woolies and Coles. Aldi and Costco have been lowering prices by pushing private label products on consumers. Both companies are planning further store rollouts in the near future.
The recent selloff in Woolies is due to surprisingly little growth in its first quarter update, which has forced investors to recheck their investment thesis. What's more, the group's home improvement chain, Masters, is continuing to weigh on earnings and investor confidence.
At today's price of approximately $31.70, Woolworths' shares are still richly priced and investors are afforded little, if any, downside protection.
ANZ Banking Group
ANZ is Australia's third largest bank by market capitalisation and the only one actively seeking growth in Asian markets. Since CEO Mike Smith launched the bank's Super Regional Strategy in 2007, revenues from key foreign growth markets have swelled to 24% of the group total.
Despite its success overseas and record $7.1 billion profit result in FY14, ANZ's share price has lagged the index by around 1.5% this year.
Similar to Woolies, its performance is likely a result of its rich valuation at current market prices. That's despite above average growth in home loans and a sharp increase in small business lending.
Buy, Hold, or Sell?
Despite all three companies' share prices falling throughout 2014, I believe only CCA presents as a compelling investment. However, leading into 2015 there's another ASX stock I think every Aussie investor should buy before Coca-Cola Amatil…
