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Westpac Banking

posted on July 3, 2012 at 12:02 am
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Tomorrow, July 3, 2012, I’m going to do one of my periodic updates of my Dividend Income portfolio. Those updates are useful for several reasons: I get to think about how dividends work in the current stock market, report on how the portfolio is doing, and make a few buys and sells.

And because they give me a chance to check up on my bookkeeping and see if the page that tracks this portfolio is up to date with the changes I’ve made in individual posts.

To my chagrin it isn’t. In my last post on this portfolio on portfolio February 3 http://jubakpicks.com/2012/02/03/looking-for-higher-dividend-yields-and-dividend-growth-here-are-three-picks/#more-8475  I added three stocks to my dividend income portfolio http://jubakpicks.com/jubak-dividend-income-portfolio/ and dropped three.

The reason, I argued then, was that the growing popularity of dividend paying stocks at a time when income vehicles such as Treasuries and CDs pay almost nothing had created a glorious but still real problem for income investors. As investors flocked into dividend-paying shares, they drove up share prices. That was great for investors already fully invested, but for investors looking to get into new positions or for investors looking to put more cash into existing positions, it meant that yields were in constant danger of erosion. In this situation, income investors needed to look for stocks that paid higher yields now and that were also positioned—by their growing cash flows and by management disposition—to keep raising dividends. Look for those stocks, I advised, and beware dividend payers that didn’t seem to be in a position to keep raising dividends.

And with that as background I tweaked this portfolio by adding General Electric (GE), Westpac Banking (WBK) and Kinder Morgan Partners (KMP) while dropping Potlatch (PCH), Merck (MRK) and Abbott Laboratories (ABT).

Well, at least that’s what I said in that February 3 post but one buy and one sell from that date never made it onto the portfolio page. So tonight, I’m doing a little catch up. I never actually got the buy of Westpac Banking done on the portfolio page. I’m going to fix that with this post.

Australia’s Westpac Banking pays its dividend twice a year—the last ex-dividend date was on May 14 and the next is in November. Each U.S. traded ADR represents five shares of the Australian bank so the 82-cent dividend payable to investors of record as of May 18 came to $4.10 for each ADR. That gives the ADR a 7.6% yield.

You should be ready for a little volatility in exchange for that dividend. Australian stocks in general dance to the tune of economic reports from China. When growth is projected to slow in China, Australia’s stocks drop as investors anticipate a slowdown in Australia’s exports of commodities to China.  And exactly the opposite effect goes to work when optimism about China’s economy is on the upswing.

In the long-term I also like the dividend from these shares because I think the Australian dollar will be one of the stronger currencies against a declining dollar. U.S.-based investors will get paid in a strengthening currency over time.

The ADRs traded at a split adjusted $22.90 on February 3.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did not own shares of any stock mentioned in this post as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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3 comments

  • alovasz on 3 July 2012

    Jim,
    I was looking at your dividend portfolio and noticed a glitch with Santander. Santander as “STD” ticker name no longer exists which is why your system cannot compute “today’s change”. Santander ticker has been converted to SAN. Just thought you might want to know.

    BTW, keep up the great work.
    Thx for all you do.

  • bleye on 3 July 2012

    You recommend SDRL. Yet when I look at this stock it has a payout ratio well about 100%. I alway beleive you shouldn’t buy div paying stock who payout ratio is over 100%. THere might be a good chance of cutting the div by the company force the price down. The other action might be the market will force the price down because of the high payout ratio.
    Could you commet on yourtake of the payout ratio as a tool to help decide when to buy a div paying stock.

    thanks
    elmer

  • holland73 on 22 May 2013

    I’m concerned about WBK-Wespac Banking. Should this one be a “sell”?

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