The Top 20 Australian Companies by Market Capitalization

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The ASX Top 20 is comprised of the largest 20 Australian publicly-listed companies by market capitalization. The following table lists these companies with their tickers on the US markets ,if available and the current dividend yields:

S.No.CompanyTickerMarket Capitalization as of Mar 6, 2013 (in A$s)Dividend Yield as of Mar 5, 2013Sector
1RIO TINTO LIMITEDRTNTF$358,707,607 3.57%Materials
2BHP BILLITON LIMITEDBP$287,153,366 3.07%Materials
3COMMONWEALTH BANK OF AUSTRALIA.CMWAY$277,839,804 7.26%Banking
4WESTPAC BANKING CORPORATIONWBK$242,871,846 5.30%Banking
5NATIONAL AUSTRALIA BANK LIMITEDNABZY$237,245,326 6.05%Banking
6AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDANZBY$179,818,344 5.16%Banking
7WESTFIELD RETAIL TRUSTWTSRF$161,986,724 6.07%Real Estate
8TELSTRA CORPORATION LIMITED.TLSYY$137,753,923 6.30%Telecom
9WOODSIDE PETROLEUM LIMITEDWOPEY$132,143,008 4.85%Energy
10WESFARMERS LIMITEDWFAFY$120,476,736 4.25%Food and Consumer Staples retail
11FORTESCUE METALS GROUP LTDFSUGY$114,421,357 1.85%Materials
12WOOLWORTHS LIMITEDWOLZY$103,445,038 0.00%Food and Consumer Staples retail
13NEWCREST MINING LIMITEDNCMGY$97,304,201 1.57%Materials
14CSL LIMITEDCMXHY$89,275,653 1.60%Pharma and Biotech
15NEWS CORPORATIONNWS$84,386,026 0.56%Media
16QBE INSURANCE GROUP LIMITEDQBIEY$67,525,699 3.63%Insurance
17ORIGIN ENERGY LIMITEDOGFGY$66,500,998 4.05%Energy
18BRAMBLES LIMITEDBMBLY$63,791,119 3.07%Professional Services
19WESTFIELD GROUPWFGPY$59,961,187 4.50%Real Estate
20OIL SEARCH LIMITEDOISHY$57,041,477 0.51%Energy

 

Data Sources: Australian Financial Review and Business Spectator

Since Australia is a resources-based economy, the top two highly valued companies are in the materials sector. Four banks are the next most valued companies. This is not surprising since banks act as the financial pillar of the Australian economy providing financing to companies and consumers alike. Since the real estate sector has held up well in the past few years Aussie banks have not been adversely impacted like their peers in Europe and in the U.S. Australian banks also have high exposure to the fast growing markets in Asia. For example, ANZ Banking Group (ANZBY) was recently named as one of the top four corporate banks in Asia.

From an investment standpoint, the four banks noted and the Telstra(TLSYY) look attractive at current or lower levels for long-term investment. Investors willing to add commodity stocks which can be highly volatile can consider the resource companies shown in the table above.

Note: Dividend yields noted are as of Mar 5, 2013

Disclosure: No Positions

Italian Stocks Hit With Financial Transaction Tax (FTT)

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Italy-flagLast year France became the first country to enact the Financial Transaction Tax (FTT) on stocks and other financial instruments. Other European countries were expected to follow this trend.

Effective March 1st, 2013, the Italian government has imposed a Financial Transaction Tax (FTT) on stocks and other instruments. Though it has not been confirmed by ADR issuers, this tax will most likely be applied to Italian ADRs as well.  A few points to remember regarding the Italian Financial Transaction Tax:

  • Effective March 1st Italian companies headquartered in Italy with a market capitalization of EUR 500.0 million or more will be subject to the FTT. Buyers of stocks in these companies will be levied a tax of 0.12% of the total purchase amount.
  • In addition to the FTT, a High-Frequency Trading Tax (HFTT) of 0.02% will be levied on HFT orders.
  • U.S. stocks brokers will be required to collect the new taxes and remit to the Italian government by the 16th of the month following the transactions.

For more related information please see:

Financial Transaction Tax in Italy (ABN Amro)

Italian financial transactions tax – Italy imposes Tobin tax on financial transactions (Norton Rose)

ITALY – Financial Transaction Tax – update 2 (RBC Investor Services)

Global FS tax newsflash: Financial transaction taxes — the Italian FTT takes shape (PWC)

Italy Introduces a Financial Transaction Tax as of 2013 (Harvard Law School Blog)

Financial-transaction taxes – Skimming the froth (The Economist, December 2012)

Airgas: A Superb Stock To Own in the Chemicals Sector

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ChemicalsOne of the best sectors to own during any market is the chemical sector. Though they are cyclical chemical stocks tend to perform well in the long-run. In the mid-cap chemicals space, one of the names investors can consider is Airgas Inc (ARG). The company is an industrial gas distributor with a solid track record.

The excellent  performance of Airgas since 2000 is shown below:

Click to enlarge

Airgas-Returns-Since-2000

Source: Yahoo Finance

A brief overview from the corporate site:

Airgas, Inc. (NYSE: ARG), through its subsidiaries, is one of the nation’s leading suppliers of industrial, medical and specialty gases, and hardgoods, such as welding equipment and related products. Airgas is a leading U.S. producer of atmospheric gases with 16 air separation plants, a leading producer of carbon dioxide, dry ice, and nitrous oxide, one of the largest U.S. suppliers of safety products, and a leading U.S. supplier of refrigerants, ammonia products, and process chemicals.

Airgas was founded in 1982 by Executive Chairman Peter McCausland and became a publicly-traded company in 1986. Through strategic growth initiatives and more than 400 acquisitions, Airgas has become one of the premier industrial gas companies in the U.S., with an unparalleled packaged gas distribution platform. More than 15,000 employees work in approximately 1,100 locations, including branches, retail stores, gas fill plants, specialty gas labs, production facilities and distribution centers. Airgas also markets its products and services through eBusiness, catalog and telesales channels. Its national scale and strong local presence offer a competitive edge to its diversified customer base.

Currently Airgas has market capitalization of over $7.0 billion and a dividend yield of 1.59%. Last year the company had total revenues of around $5.0 billion and the profit margin is around 7.0%.

According to the company’s data, a $1,000 investment on Dec 19, 1986 would be worth $103,500.04 today with dividends reinvested yielding a superb return of 10,275.94%.

Also a $1,000 investment made on January 2, 2000 would be worth $ 12,662.55 for a return of 1,176.39% assuming dividends were reinvested.

Note: Dividend yields noted are as of Mar 1, 2013

Disclosure: No Positions

Five Reasons to Buy Dividend Stocks

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Of all the ratios that are available to evaluate a company, dividend yield is probably one of the best ways to measure the performance of the company. Since dividends have to be paid out of a company’s profits there are not many ways to manipulate this figure unlike others. Any company that does not pay dividends is betting on growth to take the stock price higher. Hence these stocks may not suitable for all investors. If a company’s strategy or idea fails to take off or a competitors appears leading to loss of market share, a company’s stock can get killed. Hence it is always a wise strategy for conservative to look for companies that pay at least some amount of dividends.

While there are plenty of reasons to invest in dividend stocks, the following are five of them: 

  • Dividends give some form of return to a shareholder. This return can be used by the shareholder any way he wants.This freedom does not  come with non-dividend payers.
  • Companies that hoard cash and do not pay dividends hold all the power that technically should be belong to shareholders. For example, a company that pays no dividends and hoards billions dollars of earnings can determine how it wants to spend that money. Case in point is Apple which has literally billions in cash and investors are fighting in vain to get Apple to payout more. Other companies simply squander the money on dubious acquisitions.
  • Dividends paid out to shareholders can be reinvested to boost total returns due to the effect of compounding.
  • Based on the “bird-in-the-hand” theory dividends are preferable to capital gains since the former is certain and the later is uncertain and may or may not occur in the future.
  • Dividend payouts on a regular basis such as quarterly is a great way to generate income from investing in equities. This is highly desired by investors such as senior citizens who need the income for living. Holding even millions of a non-dividend paying stock will not give any periodic income.

The following chart shows the strong performance of five solid dividend-payers since 2000:

Click to enlarge

5-Dividend-Paying-Stocks-Returns

Source: Yahoo Finance

The current dividend yields of the above five stocks are listed below:

1.Company: Kellogg Co (K)
Current Dividend Yield: 2.91%

2.Company: Cullen/Frost Bankers Inc (CFR)
Current Dividend Yield: 3.18%

3.Company: Colgate-Palmolive Co (CL)
Current Dividend Yield: 2.17%

4.Company: 3M Co (MMM)
Current Dividend Yield: 2.45%

5.Company: Southern Co (SO)
Current Dividend Yield: 4.37%

Note: Dividend yields noted are as of Mar 1, 2013

All the stocks yield above 2% in dividends and are very good picks for the long-term.

Disclosure: No Positions

Why Invest In Canadian Dividend Stocks

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Many Canadian companies generally tend to have higher dividend yields than their peers south of the border. For example, the dividend yield of the benchmark S&P/TSX Composite Index was 3.3% at the end of February relative to just 2.5% for the S&P 500 according to FT market data. Since Canada is mostly a natural resources-based economy, Canadian equity markets are home to hundreds of resource firms in the mining and related sectors. Hence when looking for investment opportunities in Canada, it is wise to avoid the speculative plays such as start-up gold miners, oil exploration companies, etc. and instead focus on the well-established dividend paying stocks. The reason for this suggestion is that unlike in the U.S., dividends account for a substantial portion of the total return of Canadian stocks.

The following charts show the significance of dividend returns in the total returns of the S&P/TSX Composite Index:

Dividends-Part-in-Total-Returns-of-Canada-Benchmark-Index

Note: Returns shown above are based on Canadian dollars.

Source: The Role of Dividends in Income Portfolios, Practice Essentials Canada, Indexing 201, S&P Dow Jones Indices

Dividends accounted for about one-third of the total returns of the S&P/TSX Composite Index with price appreciation contributing the remaining two-thirds since 1956 as per the research report by Standard & Poor’s. As the above chart shows, from 1956 to 2012 dividends have made up about an astonishing 38% of the total returns of the S&P/TSX Composite Index.

Ten Canadian stocks trading on the US markets with yields of more than 2% are listed below for consideration:

1.Company: TELUS Corp (TU)
Current Dividend Yield: 3.62%
Sector: Telecom

2.Company: BCE Inc (BCE)
Current Dividend Yield: 5.01%
Sector: Telecom

3.Company: Manulife Financial Corp (MFC)
Current Dividend Yield: 3.49%
Sector: Insurance

4.Company: TransCanada Corp (TRP)
Current Dividend Yield: 3.85%
Sector: Oil & Gas Transportation

5.Company: Enbridge Inc (ENB)
Current Dividend Yield: 2.81%
Sector: Oil & Gas Transportation

6.Company: Bank of Novo Scotia (BNS)
Current Dividend Yield: 3.84%
Sector: Banking

7.Company: Bank of Montreal (BMO)
Current Dividend Yield: 4.62%
Sector: Banking

8.Company: Canadian Imperial Bank of Commerce (CM)
Current Dividend Yield: 4.53%
Sector: Banking

9.Company: Royal Bank of Canada (RY)
Current Dividend Yield: 3.95%
Sector: Banking

10.Company: Toronto-Dominion Bank (TD)
Current Dividend Yield: 3.81%
Sector: Banking

Note: Dividend yields noted are as of Mar 1, 2013

It should be noted that Canada gives preferential treatment to stocks held in qualified US retirement accounts such as IRAs with respect to withholding taxes on dividends. Canada does not withhold the usual withholding taxes on dividends from Canadian companies if the stocks are held in these accounts. Hence in addition to high dividend yields offered by Canadian firms, this tax policy provides an added incentive for US investors to invest in Canadian dividend stocks.

Disclosure:  Long all five banks noted above.