CIMB: Investors should go for high-dividend counters
PETALING JAYA: Stocks with high dividend yields continue to provide some form of protection to investors who are seeking defensive stocks amid the current market and political concerns, said CIMB Research.
CIMB has picked its top five high yield stocks- DiGi.com Bhd, Gamuda Bhd, Public Bank Bhd, Telekom Malaysia Bhd and Wellcall Holdings Bhd.
The stocks were expected to give a dividend yield of close to double-digit percentage and above in financial year 2009 and were rated “outperform”, it said.
In its recent research report, CIMB said: “We believe that the high dividend yields of these companies are sustainable thanks to strong cash flows and balance sheets.”
The report said DiGi is an outperform stock that offers both defensive and growth elements in an uncertain environment.
“We believe DiGi will pay above its free cash flow yield of 7% to 9% in the next few years to optimise its balance sheet,” it said, adding that key catalysts for growth includes potential capital management moves, a positive impact from mobile number portability and a greater competitiveness with 3G.
Assuming that DiGi pursues a net debt and earnings before interest, tax, depreciation and amortisation of 1 to 1.5 times in FY08, shareholders are expected to get a return of RM3.20 to RM4.65 per share.
Despite rising raw material prices and weaker long-term earnings visibility for the construction sector, Gamuda remains an “outperform.”
Given its strong cash support of about RM300mil per annum from its concessions, Gamuda offers a solid three-year earnings compound annual growth rates of 31% and the highest dividend yield of above 10%.
In addition, the sale of Gamuda's 40% stake in Syarikat Pengeluar Selangor Holdings Bhd and 80% stake in Gamuda Water Sdn Bhd estimated at RM1.5bil to RM2bil would result in a potential special dividend.
Public Bank remains CIMB's top-pick thanks to its strong fundamentals that includes a high return on equity of 20%, fastest loan growth, non-performing loans ratio of 1% and the lowest cost-to-income ratio in the banking sector.
CIMB is maintaining a “trading buy” on Telekom as it believes the shares have not priced in the likelihood of a special dividend in coming quarters.
TM is believed it would consider a special dividend after receiving TM International Bhd's loan repayment to TM, said CIMB.
Due to rising production costs, rubber hose manufacturer Wellcall's group earnings is expected to remain strong as there are further signs that major players in the rubber hose industry are outsourcing their orders to smaller players such as Wellcall.
Currently, Wellcall offers more than 11% dividend yield at its current price.
It pays out 50% of its earnings backed by its strong net cash position of RM28mil.
DiGi, Gamuda and Wellcall are in a good net cash position and enjoy robust earnings growth, while Public Bank is pursuing a 100% payout ratio and TM has surplus cash, said CIMB.
PETALING JAYA: Stocks with high dividend yields continue to provide some form of protection to investors who are seeking defensive stocks amid the current market and political concerns, said CIMB Research.
CIMB has picked its top five high yield stocks- DiGi.com Bhd, Gamuda Bhd, Public Bank Bhd, Telekom Malaysia Bhd and Wellcall Holdings Bhd.
The stocks were expected to give a dividend yield of close to double-digit percentage and above in financial year 2009 and were rated “outperform”, it said.
In its recent research report, CIMB said: “We believe that the high dividend yields of these companies are sustainable thanks to strong cash flows and balance sheets.”
The report said DiGi is an outperform stock that offers both defensive and growth elements in an uncertain environment.
“We believe DiGi will pay above its free cash flow yield of 7% to 9% in the next few years to optimise its balance sheet,” it said, adding that key catalysts for growth includes potential capital management moves, a positive impact from mobile number portability and a greater competitiveness with 3G.
Assuming that DiGi pursues a net debt and earnings before interest, tax, depreciation and amortisation of 1 to 1.5 times in FY08, shareholders are expected to get a return of RM3.20 to RM4.65 per share.
Despite rising raw material prices and weaker long-term earnings visibility for the construction sector, Gamuda remains an “outperform.”
Given its strong cash support of about RM300mil per annum from its concessions, Gamuda offers a solid three-year earnings compound annual growth rates of 31% and the highest dividend yield of above 10%.
In addition, the sale of Gamuda's 40% stake in Syarikat Pengeluar Selangor Holdings Bhd and 80% stake in Gamuda Water Sdn Bhd estimated at RM1.5bil to RM2bil would result in a potential special dividend.
Public Bank remains CIMB's top-pick thanks to its strong fundamentals that includes a high return on equity of 20%, fastest loan growth, non-performing loans ratio of 1% and the lowest cost-to-income ratio in the banking sector.
CIMB is maintaining a “trading buy” on Telekom as it believes the shares have not priced in the likelihood of a special dividend in coming quarters.
TM is believed it would consider a special dividend after receiving TM International Bhd's loan repayment to TM, said CIMB.
Due to rising production costs, rubber hose manufacturer Wellcall's group earnings is expected to remain strong as there are further signs that major players in the rubber hose industry are outsourcing their orders to smaller players such as Wellcall.
Currently, Wellcall offers more than 11% dividend yield at its current price.
It pays out 50% of its earnings backed by its strong net cash position of RM28mil.
DiGi, Gamuda and Wellcall are in a good net cash position and enjoy robust earnings growth, while Public Bank is pursuing a 100% payout ratio and TM has surplus cash, said CIMB.
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