Christmas has come early for the bank’s shareholders with the decision to slightly increase the 2024 dividend – despite a single-digit decline in the net profit and cash earnings.
Beating the market benchmark is never easy, with 72 per cent of Australian actively managed global equity general funds trailing the S&P World Index in the six months to June 30, 2024. Domestic equity funds performed slightly better, albeit against a significantly lower bar set by the S&P/ASX 200 Index.
A post reporting season update on five blue chip stocks
In this article, I’ve provided a short update on a number of widely held and strong ‘blue-chip’ businesses following the recent reporting season.
Commonwealth Bank (ASX:CBA) lead the earnings reports today, with all eyes on the dividend management delivered $1.50 per share. That represents a 53% increase on the small 2020 dividend but 25% down on the previous year. Cash profit fell 10.8% to $3.88 billion with business lending beginning to accelerate, growing at three times the rest of the banking system. The company reported a .03% fall in their net interest or profit margin, to 2.01%, as low interest rates impact o profitability. CommSec on the other hand was a highlight, benefitting from the Robin Hood story, reporting 230,000 new accounts opened in 2020 and a doubling of trading volume to $110 billion. Doomsday loan default scenarios have been avoided, with just 25,000 home loans deferred as at 31 December down from 145,000 in June. CEO Matt Comyn flagged his intention to continue flexing CBA’s market share muscle, now 34%, in order to expand their services and extract further efficiencies; shares fell 1.5% despite the improved dividend.
Ramsay Healthcare (ASX:RHC) was the standout, jumping 7.7% after reinstating their dividend, at 48.5 cents per share. The private hospital operator reported a ‘resilient’ result, with revenue down 6.6% to $5.9 billion globally, but individual countries offering a glimpse of the pandemic response. Asia Pacific led the way with revenue falling just 0.5%, Europe in general fell 0.8% but the UK fell 82.5% with the government offering significant support in each case to ensure beds were always available for use. Profit fell 12.5% to $226 million in what can only be described as a disastrous year for the healthcare sector, but managed confirmed their key Australian operations are now running at around full capacity offering hopes for a strong 2021 as a backlog of surgeries are completed.
Chadstone shopping centre owner Vicinity Centres (ASX:VCX) offered some positive news amid what was a difficult second half for the group. Management announced a $394.1 million loss for the year, driven primarily by the $572.4 million reduction in their value of their property portfolio. Despite the devaluation, the company reported that cash collection has now reached 72% including Victoria, with visitation also nearing 80% across each of their key assets. Funds from operations, or more importantly distributable income, fell to $267.1 million but a distribution of 3.4 cents was announced, 50% of 2020’s payment but a payout ratio of 65% of income. Despite the weak performance VCX’s net tangible asset value of $2.17 is well above the current share price, offering long-term investors a rare discount for a high quality property portfolio.
Wesfarmer’s (ASX:WES) finished 0.6% higher after reporting a 16.6% increase in revenue, with operating leverage sending net profit for the year up 25.5%. The standout remains the Bunnings and Officeworks franchises, which saw sales increase 24.4% and 23.7% in the first half on 2019 levels, with the former remaining the key cash flow driver of the business. The pandemic forced Bunnings to finally embrace online sales, jumping 125% across the group in total, which has seen an expansion in profit margins. Free cash flow improved 89% on the previous year, however this included the acquisition of Kidman Resources and Catch Group. The dividend was increased by 17.3%, with the most powerful news being the decision to proceed with a $950 million investment into the Mt Holland Lithium project as the group pivots to electric vehicle market.
Woolworths (ASX:WOW) reported a 16% increase in profit to $1.13 billion and delivering a 15% increase in the dividend after another strong half. The strength was broad based with most business lines benefitted from the pandemic conditions, supermarket sales were 11% higher, Endeavour Drinks 19%, and BIG W the strongest at 20%. The strength in these units overcome a 45% drop in earnings in the hotels division, the only weak spot in the business. After putting the demerger of their hotels and liquor division on hold in 2020, management confirmed the businesses had been structurally separated and the deal should proceed in June 2021; shares increased 1.1% on the news. Interestingly, the company’s inventory turnover level fell by 3 days in the half down from 38 days, with strong sales seeing significant product turnover.
