We recently covered the CBA share price’s inability to break through resistance at $82.
Today, we look at three ASX dividend stocks that could be well placed to outperform the banking giant.
With paltry returns being offered on deposits in a low interest rate environment, here are the three stocks we profile today:
As always, you should do your own research and consider the risks involved in any investment.
First two dividend stocks share a theme…
Having recently worked with Phil Anderson — whose understanding of the real estate cycle is perhaps second to none, Servcorp and Charter Hall play on a similar theme.
Phil looked at over 100 years of US real estate data and came to some important conclusions.
According to him, the US real estate cycle has never lasted less than 17 years or more than 21 years.
On average it is 18.6 years.
Counting forward from the 2008 financial crisis (which he predicted), we are now about 11 years into the cycle and approaching what he terms, the ‘mid-cycle slowdown’.
The idea here is that as the US real estate market potentially cools off after a strong run following the GFC — some of this will reach Aussie shores.
The real estate market in Australia has shed some of its historic gains, but auction rates are improving and some muted confidence is beginning to return.
But here’s an important distinction…
The Aussie housing market could be more vulnerable to what comes out of the US than the commercial and industrial real estate sectors.
Even if your home’s losing value — you still need somewhere to work.
That’s where Servcorp and Charter Hall come into the picture as defensive plays.
Servcorp paid out two dividends in the last 12 months for a total of 23 cents on today’s share price of $4.29, so a yield of about 5.4%. The dividends are not fully franked however.
They focus on the office world.
Servcorp rents offices, arranges virtual offices, co-working spaces and meeting rooms.
The Servcorp share price had a rocky period between this time last year and April, but it has had some strong form since — up 67% from a low of $2.55.
Their latest annual report had some promising numbers, NPAT of $29.2 million and revenue of $337.2 million (up 1% and 8% respectively).
Think of it as an Aussie WeWork that actually makes money.
P/E of 75.9 could be a concern, but the company has $65.1 million in cash so it’s got a bit of a buffer.
Next up is Charter Hall Long WALE REIT, a real estate investment trust with a particular focus on ‘assets that are predominantly leased to corporate and government tenants on long term leases.’
The government is not going to run out of money in a downturn, right?
And while the corporates may be a bit more vulnerable, the original thesis that you still need somewhere to work should still stand.
Charter Hall Long Wale REIT paid three dividends totalling 21 cents against a share price of $5.81, but all of these were unfranked unfortunately.
Not the best.
But it’s up a healthy 37.9% in the last 12 months, and REITs as a whole are worthy of consideration if the cycle is anything to go by/you have a longer investment horizon.
The last dividend stock is a well-managed LIC
WAM Capital is an LIC which stands for listed investment company.
It’s like purchasing a package of stocks via a single stock.
And you can see some of WAM Capital’s holdings below:
WAM Capital’s philosophy is to focus on ‘undervalued growth companies’.
While not all of the companies above have been winners, they have still managed to beat the All Ords by 6.9% during the financial year to 9 September 2019.
They have paid two fully-franked dividends totalling 15.5 cents against today’s share price of $2.32, so a yield of nearly 6.8%.
WAM is short for Wilson Asset Management, which was started by Geoff Wilson AO in 1997.
Mr Wilson has been at it a long time, he’s a tried hand who knows the investment world very well.
Returning to the cycle, WAM Capital may be dinged up in a downturn.
But given Mr Wilson’s ability, this LIC could bounce back strongly.
With income investing it’s all about a longer investment horizon — and WAM Capital’s dividends have been steadily growing over the years, which is certainly a positive.
For more dividend stock ideas, make sure to check out our ‘Top Five Dividend Stocks for 2019’ report.
One of the plays in the report represents a unique way to benefit from rising geopolitical tensions…
For Money Morning