Five Australian Stocks To Consider For Income and Growth

Posted by David Hunkar on 26 November 2014, 7:58 am

The U.S. market has performed well this year with the S&P 500 up 11.8% as of yesterday. On the other hand, many of the other developed markets including Australia.are lower than the U.S. market.Australia’s SP/ASX 200 benchmark index is basically flat at -0.30% year-to-date.

The following chart shows the long-term performance of ASX 200 against S&P 500:

Click to enlarge

Generally dividend yields of Australian stocks are higher than the US stocks and even European stocks.The chart below shows huge difference between the dividend yields of MSCI Australia and MSCI World Excluding Australia:

Source: The Australian Economy and Financial Markets, Chart Pack November 2014, Reserve Bank of Australia

Though Australia is a resource-based economy, due to the decline in commodity prices and the continued lower demand from China it is better to stick with non-resource based companies when investing in the Australian equity market.

Five Australian stocks are listed below with their tickers and the current dividend yield for consideration:

1.Company: Westpac Banking Corp (WBK)
Current Dividend Yield: 5.90%
Sector: Banking

2.Company: Australia and New Zealand Banking Group Ltd (ANZBY)
Current Dividend Yield: 5.81%
Sector:Banking

3.Company: National Australia Bank Ltd (NABZY)
Current Dividend Yield: 6.40%
Sector:Banking

4.Company:Commonwealth Bank of Australia (CMWAY)
Current Dividend Yield: 5.18%
Sector: Banking

5.Company: Telstra Corp Ltd (TLSYY)
Current Dividend Yield: 5.44%
Sector:Telecom

Note: Dividend yields noted above are as of Nov 25, 2014. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: Long NABZY

Goldman Sachs: 32 Best European Stocks For 2015

Posted by David Hunkar on 23 November 2014, 9:57 am

Every year around this time of the year Wall Street banks, pundits, financial gurus and others engage in a ritual by publishing their stock picks for the following year. These lists must be taken with a grain of salt but they are worth taking a quick look at. Having said that, listed below are Goldman Sachs’ 32 best European stock picks with their tickers on the US markets, if available.They project double and even triple digit percentage returns for some of these stocks in 2015.

Innate Pharma (IPHYF)
Unipol Gruppo Finanziario (UFGSY)
Crest Nicholson Holdings
ARM Holdings plc (ARMH)
BT Group plc (BT)
Credit Suisse Group (CS)
SAP SE (SAP)
Intesa Sanpaolo (ISNPY)
E.ON AG(EONGY)
Easyjet plc (ESYJY)
Salvatore Ferragamo SpA (SFRGY)
Iliad SA(ILIAY)
Grifols SA (GIKLY)
Banco Bilbao Vizcaya Argentaria, S.A. (BBVA)
Burberry Group plc (BURBY)
Erste Group Bank AG (EBKDY)
Taylor Wimpey plc (TWODY)
Eni Spa (E)
Safran SA (SAFRY)
Daimler AG (DDAIY)
Siemens (SIEGY)
L’Oreal
Shire plc(SHPG)
MTU Aero Engines AG(MTUAY)
Bayer AG (BAYRY)
SABMiller plc (SBMRY)
Anheuser-Busch InBev SA/NV (BUD)
Roche Holding AG (RHHBY)
WPP plc (WPPGY)
Tryg A/S
Zurich Insurance Group AG (ZURVY)
St. James’s Place plc

Source: Goldman Sachs says these are the 32 best European stocks for 2015, Financial Post

The banking sector in Europe is projected to recover next year as they are in much better shape now than int he past few years.Besides the share prices of major banks are relatively cheaper than their US peers. Two of the banking stocks in the above list include Erste Bank and Credit Suisse. Austria’s Erste has huge exposure to the Central and East European markets and those markets have fared better recently than the European core.

Another good pick in the above list is the aerospace and defense company, Safran of France. US companies in this sector have been doing well for many years now despite cuts to the US defense budget. Safran has better potential for growth than others. An interesting article on Safran can be found here.

Other high quality companies that can be held for the long-term in the Goldman’s list are beer makers SABMiller and Anheuser-Busch InBev, pharma majors Bayer and Roche and telecom provider BT group of UK.

Click to enlarge

The Statute of Liberty, Liberty Island, New York

Disclosure: Long SAFRY, EBKDY, EONGY, BBVA

How Big Are the Economies of Individual States in the U.S.?

Posted by David Hunkar on 22 November 2014, 10:20 am

The U.S. is the world’s largest economy with a GDP of $16.72 in 2013 based on purchasing power parity according to the the CIA World Factbook. The next largest economies are the EU, China, India and Japan in that order based on 2013 estimates. Compared to the U.S. economy, many of the developed world’s economies are small. For example, the German economy is just $3.2 Trillion in size compared to the $16.0 Trillion U.S. economy.

Since the U.S. economy is so huge, the economies of each of the individual states in the country are also big. In fact, their sizes are comparable to the economies of many countries. Other countries have a lot to catch up in terms of productivity and economic growth.

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US Map:

Source: MapsofWorld.com

The following map puts the sizes of the economies of individual US states in perspective. The whole Australian economy is just about the size of the Texas economy.

Source: Unknown

On The Dividend Payout Ratio of Japanese Stocks

Posted by David Hunkar on 16 November 2014, 9:52 am

In an article in September I wrote that the payout ratio of U.S. is on a long-term decline and is now less than 40%. The payout ratio for European companies is on an uptrend and has reached about 50%.

Compared to U.S. and European companies, Japanese companies are very stingy when it comes to rewarding their shareholders in the form of dividends. In fact, income investors generally do not consider Japanese stocks when evaluating the equity universe in the the developed world for dividend stocks. As of Nov 13, the dividend yield for U.S. stocks is 1.9% while the yields on the France, Germany, Spain and UK stocks are 3.1%, 2.8%, 4.4% and 3.8% respectively according to FT Market Data. The dividend yield for Japan stocks is lower than that of the U.S. stocks at just 1.7%.

The dividends paid by companies in the TOPIX index is rising as shown in the chart below:

Click to enlarge

However the dividend payout ratio has been stagnant and has stayed below 25% in the past few years:

Source: Evolving Markets, Oct 2014, Nikko Asset Management Asia Limited

Though Japanese companies are generating higher earnings they are not increasing the payouts to shareholders.According to a report by Nikko AM, the current Abe administration may start emphasizing the importance of dividend payouts congratulating companies that increase their payouts.

Since the current payout ratio in Japan is much lower than in the U.S. and Europe, Japanese companies should increase their payouts considerably in order catch up with other markets in the developed economies. Higher dividend payouts would also attract more domestic and foreign investors to invest in Japanese stocks.

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