Question 1: Can you tell me the companies that pay the highest franked dividends, and also those that have unused dividends/credits available?.
Answer: According to research by Macquarie, the 10 highest dividend yielding companies (grossed up for franking credits) are:
- Fortescue Metals
- Nick Scali
- BHP
- Super Retail Group
- Jupiter Mines
- Rio Tinto
- Cromwell Property
- Aurizon Holdings
- Navigator Global Investments
- Smartgroup
You do need to be careful with mining companies and look through a couple of years.
In terms of franking credits, they nominated these companies as having the highest available (as a percentage of market cap):
- New Hope
- Southern Cross Media
- Ainsworth
- Sandfire Resources
- Mincor Resources
- Emeco Holdings
- BHP
- Peet
- Mineral Resources
- Autosports
Question 2: Following the acquisition of the Lion Dairy and Drinks Group, Bega Cheese (BGA) is doing an entitlement offer on a 1 for 4.5 basis at $4.60 a share. Should I take them up?
Answer: Yes. I am also a shareholder and taking up my shares. Firstly, the $4.60 entitlement price is quite a healthy discount to the market price ($5.35). Secondly, the acquisition looks logical and I don’t get a sense that they have overpaid, Finally, it seems to be quite a well-run company in an interesting sector.
The offer closes on Monday, so don’t delay. There is also a top up facility, where you can subscribe for an additional 50% of your entitlement.
Question 3: Do you think CIMIC (ASX:CIM )is a good value stock that will benefit from the huge amounts of government stimulus? Is it good value at the current price, and with the potential for a growing dividend?
Answer: CIMIC Group (CIM) should certainly be a beneficiary of government stimulus spending on infrastructure and building. Others you could consider include AdiBri, Boral, CSR, James Hardie and Brickworks.
A caution with CIM is that it is 71.9% owned by Hochtief (which is a subsidiary of a Spanish group ACS), so minority shareholders have to “go with the flow” and appreciate that their “interests” will not always be top of mind for the ACS appointed Directors and Management team.
On forecasts, the brokers have a target price of $28.50, about 6.4% upside to today’s price of $26.79. They are forecasting the dividend to rise from a total of 41.4c in CY20 (an effective yield of 1.5%) to 131.3c for CY21 ( a forecast yield of 4.9%).
Question 4: Could Dicker Data (DDR) reach over $15 in the next 12 months. Also, should I hang on for the long term as this stock appears to have a future?.
Answer: Dicker Data (DDR) has certainly done well in 2020 – up by around 50%. Interestingly, no major brokers cover the stock.
For the first nine months of 2020, it reported a net profit of $60.8m, up 28.3% on the same 9 months in FY19, with revenue growing by 14.9%. Assuming it maintains the same momentum in the final quarter, this will give it a net profit of around $75m, or earnings per share of about 46 cents. At a $10.50 share price, this puts it on a current multiple of 22.8 times.
Could it get to $15 in the next 12 months? That would put in on a multiple of 30 times earnings, which for an IT hardware distributor, would be pretty pricey. I would say unlikely. But given its track record of growth, I also would not be in a rush to sell – so hang on for the ride!
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.