Question of the Week

Questions of the Week

Co-founder of the Switzer Report
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1. Do you think the ANZ will now pay the interim dividend it deferred in May? If so, how much do you think shareholders will receive? Will Westpac also pay?

Yes, I think it is pretty likely (see my article tody). Yesterday, APRA gave the banks the “green light” to resume paying dividends but only up to 50% of earnings and subject to being able to meet stress tests. 

ANZ is set to deliver its third quarter trading update on 19 August and has committed to advising the market on the status of its deferred dividend. Assuming that there hasn’t been a  marked deterioration in its loan book, shareholders could expect a dividend of around 30c to 40c per share. The Westpac Board has only committed to “review dividend options over the course of the year” (no firm date) and has scheduled its third quarter trading update for 18 August. Given that its fine for money laundering breaches hasn’t yet been agreed (it has provisioned for $900m, apparently AUSTRAC is asking for up to $1.5bn), it may be somewhat more reluctant to dispense the goodies back to shareholders. 

2. What are your thoughts on continuing to hold a listed investment company (LIC) that last reported a 34% discount to NTA and pays a respectable dividend, but whose share price performance has been miserable under current management? The LIC in question is NAOS Small Cap Opportunities (NSC).

To be fair to the current manager, the performance of NSC has improved recently, and so has the NTA gap. I calculate that today it is down to around 25%. But since inception, its performance has averaged minus 5.72% pa – that is why it is trading at 52c and at such a big discount. 

What to do? Well given that they have an active share buy-back program in place, I would be inclined to hang on for a while. If you like the Manager’s investment approach (concentrated, small cap, industrial focus), then hang on, otherwise, if it got back to around 20%, I would look to sell. 

3. Waypoint REIT (WPR) has come off recently due to Charter Hall selling down its holdings. At around $2.60, is it worth accumulating this stock at current levels? 

It is unclear to me why Charter Hall would purchase a 10% stake in February in Waypoint REIT (previously known as the Viva Energy REIT) for $2.66, and then sell the entire stake in July for $2.61. Perhaps they see better opportunities with their capital. Apparently, they made a tiny profit (if the distribution is included). 

As for the brokers, they like long WALE (weighted average lease expiry) REITs such as Waypoint, but don’t see a lot of upside. According to FNArena, a target of $2.70, about 4% higher than the close of $2.59. Range is a high of $2.95 from Ord Minnett to a low of $2.45 from Morgan Stanley. On a forecast yield, reasonably attractive at 5.8% for FY20 and 6.1% for FY21. 

I don’t mind service station assets – I guess there is reasonable security of income, although I am not sure there is much capital upside as long term, there will be headwinds as transport needs change. 

Would you like your share questions answered by Paul Rickard? Submit your question here 

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