High dividend/non-finance stocks for long-term investors?

Muschu · 27 April 2008

Hi
As a retiree I have been re-balancing my portfolio and moving from managed funds to direct shares.
I think my portfolio needs a further high-dividend / lower [not zero....] risk stock. I already have enough, maybe too many, finance stocks: hence the non-finance request in the thread title.
I have considered:

TCL: I've had this before [before the slump] and the growth decline concerned me. However it may be better value in this climate?

The only other one I've looked at is TLS which I've never had.

There may be better stocks of the nature that I am interested in.

Opinions / suggestions for research would be very much welcomed. {Other retirees may also be interested or able to contibute}.

Regards

Rick

prawn_86 · 27 April 2008

Not quite sure what you personally classify as finance stocks but if your looking for yield:

Listed property trusts generally have decent yeilds. Although be careful of debt levels and complex corporate structures.

Infrastructure plays are probably your other best bet if they are not massively geared. Solid long term projects, which sould like what you are looking for...

My

reece55 · 27 April 2008

I would say be VERY careful about using historical yield for analyzing the best stocks to invest in as a retiree ATM....

Typically, the high yielders have been either mature large stocks (i.e. Telstra), infrastructure (i.e. TCL) and property trusts. Property trusts are currently being deflated and whilst historical prices look like they may be of value, I would say you have to be extremely selective. I like Goodman Group and GPT - they are the leaders, their debt is locked away and could potentially prove to be value at this point......

Looking through the list of high yielders via Comsec, here are a few I think are worth a look (as usual, just my opinion):

TCL - Transurban, relatively straight forward structurally, nice yield, mature road tolls. Love teh tax deferred component.

APA Group - Pipeline infrastructure owner, very strong financials that support their distribution. High long term contract positions in place for distribution.

HFA Holdings - Absolute return manager, yes a financial, but not only are their FUM increasing in a downwards market and they are outperforming the market by a lot in general, the fundamentals for these types of managed funds will increase in the next couple of years.

TIM - This is a risky proposition, but I think in an economy where inflation is high, managed ag schemes work well...... Chart looking like it may recover too. As I say though, risky prop. ATM.

SIP - Have a look at the SIP thread to see why I think it's worth a go at the moment...

That should get you started anyway!

Cheers

nioka · 27 April 2008

Time to tread carefully. I like to have stocks with proven performance,regular dividend history, plenty of cash in hand and expansion prospects. MCR is an example of this. There are a few around. After that look for a good time to enter. Don't put all your eggs in one basket. ( I hold MCR as one of my main share income earners.)

Muschu · 27 April 2008

reece55 said:
I would say be VERY careful about using historical yield for analyzing the best stocks to invest in as a retiree ATM....

Typically, the high yielders have been either mature large stocks (i.e. Telstra), infrastructure (i.e. TCL) and property trusts. Property trusts are currently being deflated and whilst historical prices look like they may be of value, I would say you have to be extremely selective. I like Goodman Group and GPT - they are the leaders, their debt is locked away and could potentially prove to be value at this point......

Looking through the list of high yielders via Comsec, here are a few I think are worth a look (as usual, just my opinion):

TCL - Transurban, relatively straight forward structurally, nice yield, mature road tolls. Love teh tax deferred component.

APA Group - Pipeline infrastructure owner, very strong financials that support their distribution. High long term contract positions in place for distribution.

HFA Holdings - Absolute return manager, yes a financial, but not only are their FUM increasing in a downwards market and they are outperforming the market by a lot in general, the fundamentals for these types of managed funds will increase in the next couple of years.

TIM - This is a risky proposition, but I think in an economy where inflation is high, managed ag schemes work well...... Chart looking like it may recover too. As I say though, risky prop. ATM.

SIP - Have a look at the SIP thread to see why I think it's worth a go at the moment...

That should get you started anyway!

Cheers

Thanks Reece and others. Please be assured I am not rushing in and am aware of the place of historical data.
I'll check out the suggestions and appreciate them. Reece, where on Commsec can I find the "list of high yielders" please?
Thanks
Rick

reece55 · 27 April 2008

Muschu said:
Thanks Reece and others. Please be assured I am not rushing in and am aware of the place of historical data.
I'll check out the suggestions and appreciate them. Reece, where on Commsec can I find the "list of high yielders" please?
Thanks
Rick

Rick,
Go to News & Research, Company Research, Advanced search tool. Then select income as category, dividend yield in the field select option greater than whatever you want (I did 5%). Be sure to specify the yield in decimal terms (i.e. .03 = 3%).

Cheers

Muschu · 27 April 2008

reece55 said:
Rick,
Go to News & Research, Company Research, Advanced search tool. Then select income as category, dividend yield in the field select option greater than whatever you want (I did 5%). Be sure to specify the yield in decimal terms (i.e. .03 = 3%).

Cheers

Thanks mate - about to do.

Muschu · 27 April 2008

reece55 said:
Rick,
Go to News & Research, Company Research, Advanced search tool. Then select income as category, dividend yield in the field select option greater than whatever you want (I did 5%). Be sure to specify the yield in decimal terms (i.e. .03 = 3%).

Cheers

OK so I'm thick! Reece when I follow these step, using 0.05, I got 2165 hits. I think I'll buy them all..
What must I be doing wrong?

Muschu · 27 April 2008

Muschu said:
OK so I'm thick! Reece when I follow these step, using 0.05, I got 2165 hits. I think I'll buy them all..
What must I be doing wrong?

Answering myself [unusual?].. I left out the 'add query' bit. So now I'm down to 349 hits. I can see why some of these have a high [current] yield.

Good food for thought there.

I gather
SIP = mixture of growth + yield + risk? [Yep, checked the SIP thread]
TCL = relative safety?
APA and HPA I will check further.
Thoughts on QBE and BBI? Both listed.
CTX there but I guess due to last week's drop.
MCR = yield lower than 5%?

Enough for today.

With thanks

R

Julia · 27 April 2008

reece55 said:
SIP - Have a look at the SIP thread to see why I think it's worth a go at the moment...

/QUOTE]
Reece, I've just had a look at the SIP thread. Must be missing something.
Combined with the chart (though given a small upturn in the last day or two) it looks like a complete dog. Could you explain why you think it would be a good buy?
Reasonable dividend but not outstanding.

Julia · 28 April 2008

Rick, re your search for high yield companies, how about considering as an alternative choosing high growth companies and just selling a few shares now and again when you need some cash?

Consider the following comparisons:

If three years ago you had bought WOR at about $8, it has gone to over $50, and even with the debacle of the last few months is about $40.
Minimal yield.

If three years ago you had bought LEI at about $10, it has gone to $65, and even now $46.
Minimal yield.

___________

If three years ago you had bought TCL at $7, it has gone to $8.50 ish, and now $6.60.
8.5% yield, unfranked but tax deferred.

If three years ago you had bought SIP at $2.50, it has gone to $3.25, and now is under $1.20.
5.7 yield fully franked.

Which of these is going to have given you the best overall return at the end of the three years?

reece55 · 28 April 2008

Julia said:
Rick, re your search for high yield companies, how about considering as an alternative choosing high growth companies and just selling a few shares now and again when you need some cash?

Consider the following comparisons:

If three years ago you had bought WOR at about $8, it has gone to over $50, and even with the debacle of the last few months is about $40.
Minimal yield.

If three years ago you had bought LEI at about $10, it has gone to $65, and even now $46.
Minimal yield.

___________

If three years ago you had bought TCL at $7, it has gone to $8.50 ish, and now $6.60.
8.5% yield, unfranked but tax deferred.

If three years ago you had bought SIP at $2.50, it has gone to $3.25, and now is under $1.20.
5.7 yield fully franked.

Which of these is going to have given you the best overall return at the end of the three years?

Julia
Firstly, I do take your point here about growth versus value. Normally I personally suggest a mix. My response was tailored at the question, which was high divy stocks.

However, your historical data is fairly misleading. Do you think those stocks are likely to outperform in the next 3 years? I'd be willing to wager that both WOR and LEI (both engineering firms, both contractors) will not perform particularly well going forward. Why - high valuations and their growth is slowing. Not a good combination in a nervous market. That's like saying invest in CISCO in 2001 when it went from 10 - 100 and back to 50. It's now a $25 share 7 years on! To put this into perspective, peak to trough WOR has gone from $52 to $30 (43% loss) and LEI has gone from 65 to 40 (39%). TCL meanwhile has gone from 8.40 to 5.60 (33% loss), whilst paying a very tax efficient divy. Lower deviation and in a declining earnings market, a relative safe haven.

Julia, have a re-read through the thread. I cite several reasons why Sigma appears attractive, however I do note the chart is a dog:

1. High barriers to entry in the industry;

2. Compelling fundamentals from a valuation perspective, provided the restructure investment pays off (if profit growth was terminal at this point, and i don't think it will be going forward, my back of the envelope valuation is 1.24, still a good 10% higher from where it is, see my excel workings); and supporting these are

3. Large increase in institutional buying lately, like > 20% of the stock!

I agree that she looks like a dog, but a bit of TLC might see SIP out of the dog house....

Now enough with the dog analogies and on the with the thread LOL!

Cheers

Rainmaker2000 · 28 April 2008

I like others would warn against investing just for dividends but then you are a retiree.....

I suggest you look at companies with low capital requirements like retailers, advertising companies........you will find value there at the moment....look for strong balance sheets with no debt preferably

Many of my stocks are massive yield payers at the moment, but that's certainly not the objective....they are just bloody cheap.....hehe

http://therainmaker.net.au
Small Stock Investing

Julia · 28 April 2008

reece55 said:
Julia
Firstly, I do take your point here about growth versus value. Normally I personally suggest a mix. My response was tailored at the question, which was high divy stocks.

However, your historical data is fairly misleading. Do you think those stocks are likely to outperform in the next 3 years? I'd be willing to wager that both WOR and LEI (both engineering firms, both contractors) will not perform particularly well going forward. Why - high valuations and their growth is slowing. Not a good combination in a nervous market. That's like saying invest in CISCO in 2001 when it went from 10 - 100 and back to 50. It's now a $25 share 7 years on! To put this into perspective, peak to trough WOR has gone from $52 to $30 (43% loss) and LEI has gone from 65 to 40 (39%). TCL meanwhile has gone from 8.40 to 5.60 (33% loss), whilst paying a very tax efficient divy. Lower deviation and in a declining earnings market, a relative safe haven.

Julia, have a re-read through the thread. I cite several reasons why Sigma appears attractive, however I do note the chart is a dog:

1. High barriers to entry in the industry;

2. Compelling fundamentals from a valuation perspective, provided the restructure investment pays off (if profit growth was terminal at this point, and i don't think it will be going forward, my back of the envelope valuation is 1.24, still a good 10% higher from where it is, see my excel workings); and supporting these are

3. Large increase in institutional buying lately, like > 20% of the stock!

I agree that she looks like a dog, but a bit of TLC might see SIP out of the dog house....

Now enough with the dog analogies and on the with the thread LOL!

Cheers

Hi Reece,

Yes, of course you have a good point about historical performance re LEI and WOR. I still feel the outlook for both these companies in the long term is good once some stability returns to the market.

Re fundamental valuations, that's all well and good, but it's the actual SP that is going to make or lose you money.

Put it this way, if I could only buy two stocks, I'd surely buy WOR and LEI over SIP and TCL.

All the best
Julia

Julia · 28 April 2008

reece55 said:
Julia
Firstly, I do take your point here about growth versus value. Normally I personally suggest a mix. My response was tailored at the question, which was high divy stocks.

However, your historical data is fairly misleading. Do you think those stocks are likely to outperform in the next 3 years? I'd be willing to wager that both WOR and LEI (both engineering firms, both contractors) will not perform particularly well going forward. Why - high valuations and their growth is slowing. Not a good combination in a nervous market. That's like saying invest in CISCO in 2001 when it went from 10 - 100 and back to 50. It's now a $25 share 7 years on! To put this into perspective, peak to trough WOR has gone from $52 to $30 (43% loss) and LEI has gone from 65 to 40 (39%). TCL meanwhile has gone from 8.40 to 5.60 (33% loss), whilst paying a very tax efficient divy. Lower deviation and in a declining earnings market, a relative safe haven.

Julia, have a re-read through the thread. I cite several reasons why Sigma appears attractive, however I do note the chart is a dog:

1. High barriers to entry in the industry;

2. Compelling fundamentals from a valuation perspective, provided the restructure investment pays off (if profit growth was terminal at this point, and i don't think it will be going forward, my back of the envelope valuation is 1.24, still a good 10% higher from where it is, see my excel workings); and supporting these are

3. Large increase in institutional buying lately, like > 20% of the stock!

I agree that she looks like a dog, but a bit of TLC might see SIP out of the dog house....

Now enough with the dog analogies and on the with the thread LOL!

Cheers

Hi Reece,

Your point about historical data is taken and is well made. I don't think, though, that it was misleading. I was quoting what you would have made or lost over the last three years, had you been invested in any/all of these four companies.

It may well be that SIP will turn into a fox instead of remaining a dog. I'd want to see some evidence of that happening before I put money on it.

Still believe both LEI and WOR are very sound companies and will continue to perform well into the future once confidence returns to the market.

Put it this way, if I could only buy two companies, I would surely be buying LEI and WOR over SIP and TCL.

All the best
Julia

Muschu · 28 April 2008

Rainmaker2000 said:
I like others would warn against investing just for dividends but then you are a retiree.....

I suggest you look at companies with low capital requirements like retailers, advertising companies........you will find value there at the moment....look for strong balance sheets with no debt preferably

Many of my stocks are massive yield payers at the moment, but that's certainly not the objective....they are just bloody cheap.....hehe

http://therainmaker.net.au
Small Stock Investing

Thanks Rainmaker. Care to indicate which "companies with low capital requirements like retailers, advertising companies" and which "stocks are massive yield payers at the moment" you are referring to?
Thanks
R

Muschu · 29 April 2008

Hi
I made a brief reference above to BBI. I later posted the following to the BBI thread, with little response:
"I'm wondering if this stock [BBI] is worth another look?
FNArena cites 6 buys and 1 hold on the stock. Average target price is $1.63, 42% above today's close. 12 month range is 82 cents to $2.03. Dividends at about 9%.
Are the debt level or P/E too high?
I would appreciate comments.
Thanks
R"
Any thoughts please?

Julia · 29 April 2008

Muschu said:
"I'm wondering if this stock [BBI] is worth another look?
FNArena cites 6 buys and 1 hold on the stock. Average target price is $1.63, 42% above today's close. 12 month range is 82 cents to $2.03. Dividends at about 9%.
Are the debt level or P/E too high?
I would appreciate comments.
Thanks
R"
Any thoughts please?

Those Buys you quote are a bit old now. Here is the latest info from FNArena on BBI and even that's not too recent:

JP Morgan 18-Apr-08 Following a review of the sector the broker has downgraded its rating on the stock to Neutral, at the same time lowering its price target to $1.40 from $1.60 based on its valuation estimates. Downgrade to Neutral from Overweight

Muschu · 29 April 2008

Julia said:
Those Buys you quote are a bit old now. Here is the latest info from FNArena on BBI and even that's not too recent:

JP Morgan 18-Apr-08 Following a review of the sector the broker has downgraded its rating on the stock to Neutral, at the same time lowering its price target to $1.40 from $1.60 based on its valuation estimates. Downgrade to Neutral from Overweight

Thanks Julia - good point. One of the buys is December, the other 5 are 1st April. I guess 4 weeks in this market can be considered old.
All the best
Rick

Nicks · 30 April 2008

Muschu said:
Hi
I made a brief reference above to BBI. I later posted the following to the BBI thread, with little response:
"I'm wondering if this stock [BBI] is worth another look?
FNArena cites 6 buys and 1 hold on the stock. Average target price is $1.63, 42% above today's close. 12 month range is 82 cents to $2.03. Dividends at about 9%.
Are the debt level or P/E too high?
I would appreciate comments.
Thanks
R"
Any thoughts please?

BBI Debt levels are high, but assets are deriving income from mostly regulated markets = secure income. Also their debt is securely financed. At these returns I think if you are an income oriented investor it presents a compelling opportunity.

Another high income yet stable and regular income stream is TCL. The operate Toll roads. Check them out, worth a look.

Both of these companies operate in envionments where there is little customer bargaining power or choice.

Cheers
Nicks

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