Question 1: Aurizon (AZJ) and APA have attractive yields and are both in the defensive category and ‘sensible’ types. Whey then does their price move so much? I’m considering them for sustainable yield, but are they negative equity traps?
Answer: Both stocks have been hit by ESG (environmental, social and governance) selling, which has suddenly become very fashionable with our big super funds. Aurizon hauls coal, APA is involved in gas transmission, storage and pipelines. They have also been struggling to grow revenue. While I don’t think either are a negative equity trap, I do think they are being permanently re-rated to trade at lower multiples due to ESG pressures.
Question 2: I have a large chunk of my retirement funds in BHP. I have been hanging in there in expectation of an imminent sharing with shareholders of the cash with which they must be “awash” given iron ore prices. Do you consider my “expectation” is likely to materialize?
Answer: I think you will get a ‘whopper’ dividend. We will find out after the close of business on Tuesday 17 August. The market is expecting a final dividend of US$2.04 per s hare (on consensus), about A$2.75. Probably some chance there will be a special dividend on top. See my article on BHP’s dividend: https://switzer.com.au/the-experts/paul-rickard/should-you-buy-bhp-for-the-dividend/ [1]
Question 3: Nabtrade is no longer accepting buy orders for mFunds, citing the Government’s new design and distribution obligations (DDO) which apply to product issuers and distributors from 5 October. Will this have a negative impact on the purchase of and/or value of mFunds going forward? Should we sell existing mFunds now?
Answer: I am a little surprised to learn that access to mFunds is being caught up in the Government’s new design and distribution obligations. I am sure that this wasn’t the intention. Since mFunds just convert back into the underlying managed fund, this shouldn’t have any impact on the buy/sell price (which is provided by the issuer). I don’t think you should rush to sell.
Question 4: I own Afterpay (APT) shares and plan to accept the ASX listed CDIs in Square. However, as this is a secondary listing for Square, is there a risk that after a few years, they cancel the listing on the ASX? Should I only accept their NASDAQ listed Square shares?
Answer: If you intend to be a long-term holder in Square and have other US shares, then I would accept the NASDAQ listed shares. If you don’t own any other US shares, I would probably go for the CDIs because there are costs in holding US shares. I think the risk of the ASX listing being cancelled after a few years is low (and manageable).
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