Money 2013: Pieces of eight

By Mark Lister In Money, Money 2013

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Mark Lister

Mark Lister, photo/David White.

I profiled three companies in the Listener last September – Mainfreight, Woolworths and Diageo – all of which I believe to be great companies that make excellent long-term investments. Since then, and largely in line with strong sharemarkets around the world, these companies have performed very well. Mainfreight has returned 22.1% over this period, Woolworths 12.4% and Diageo 6.9% (all in New Zealand dollars).

FOUR NEW ZEALAND SHARES THAT MAKE SENSE FOR DIVIDEND YIELD:

ARGOSY PROPERTY Argosy has a portfolio of over $900 million of office, industrial and retail property across the country. With a strong balance sheet, an improving portfolio, internal management and an excellent dividend yield of over 8.5%, Argosy is excellent for income investors.

TRADE ME Trade Me has many characteristics of a great quality online infrastructure company, with high operating margins and low working capital. The strong operating cash flows and limited capital spending requirements underpin strong returns and fund a reliable and growing dividend. Trade Me currently offers a dividend yield of 5.2%.

SKY TV Sky TV has a high-quality subscription-based business model providing strong defensive cash flows and utility-like characteristics. Sky pays a healthy dividend of over 7%, and as the business continues to mature, I expect this regular dividend will be supplemented by the occasional special dividend, as we saw in 2012.

VECTOR This is a blue-chip company with a solid capital structure and a stable dividend policy. It represents an excellent defensive exposure to the infrastructure sector, with strong cash flows, an attractive dividend yield of over 7% and low-volatility earnings.

FOUR NEW ZEALAND SHARES THAT MAKE SENSE FOR LONG-TERM GROWTH:

RYMAN HEALTHCARE Ryman is arguably the best company on the New Zealand sharemarket. Ryman has provided its investors with a staggering 33% annual return over the past 10 years, without ever asking for more capital. With a great management team, an excellent business model and the demographic tailwind of an ageing population in New Zealand and Australia, Ryman may well be just getting started.

PORT OF TAURANGA Port of Tauranga is New Zealand’s principal export port and the country’s largest port by volume and land area. Rather than being simply a stable infrastructure investment, it has also delivered outstanding growth. Investors who bought a share for $3 in 2000 would have collected over $4 in dividends alone since then, as well as having benefited from the share price increasing to $14 today. With an outstanding strategic position, Port of Tauranga still has an excellent growth profile.

FLETCHER BUILDING Fletcher is what’s called a cyclical share, which means it goes up and down with the fortunes of the economy, more so than others. At the moment, it looks good, as housing activity is starting to recover, it will benefit from repairs to leaky homes and the Canterbury rebuild is gaining momentum. Fletcher has large operations in Australia, and as interest rates fall, this market should rebound and help drive growth.

DELEGAT’S Although many exporters are doing it tough against the high dollar and weak off shore markets, wine company Delegat’s has shrugged off these challenges over recent years. Sales in the UK and Australasia are maturing, but significant growth opportunities exist in North America, Asia and parts of Europe.

Note: All the dividend yields quoted are “gross”, meaning they are pre-tax and include the benefit of imputation credits.

Mark Lister is head of private wealth research at Craigs Investment Partners.

Money 2013

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