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High dividend stocks and copper are on the menu today in our Investor Webinar
April 26, 2023
Copper, high dividend stocks, WBT, Weebit Nano
Looking for high dividend stocks on ASX? Look no further!
- In this week’s investor webinar we take a look at high dividend stocks on ASX in 4 different sectors.
- We also take a closer look at copper and what’s driving stocks in that space.
Full transcription below.
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Marc: Good morning. It’s that time of the week again, our weekly investor webinar for “Stocks Down Under.” Good Morning, Stuart?
Stuart: Good morning. Feeling bullish?
Marc: Definitely. It’s the 26th of April. I’m feeling bullish. NASDAQ overnight came down a bit, so that one seems to have made up its mind as to where it wants to go. We talked about that last week. Looks like it wants to go down a bit further. A few quarterlys came out today, including Weebit Nano, not much to report there. You know, it’s still the usual. We’re waiting for the news about the signup of some new clients and new customers. They’ve been talking about that for a while. They said they’d do that by the middle of this year, so we have a couple of months left for that. But other than that, nothing new there. So, they raise a bunch of capital including the SPP, which they increased by 5 million. They should have about 94 million in the bank at the moment. They’re pretty well capitalized right now.
And today is actually also the day that the SPP shares will be trading on the ASX, so that’s why you’re seeing a bit of pressure today. And give it a few days to sort of… You know, let the market digest all those new shares that came to market before you might see a move upwards again. And of course, any news will help in terms of, you know, announcements about customers, that sort of stuff. So, not much report. So, I’ll be very quiet today, Stuart. It’s the “Stuart Robert Show.” You’ve got copper you wanna talk about, and dividends as well. Let’s kick it off with the dividend, Stuart.
Stuart: So, we often get asked, do you have some good dividend stocks? Well, we got some ideas for you. We need to do a bit more work just to prove some of them up. But here are a few of the ways in which you can find some high-dividend stocks coming into the current market. And there are four basic themes here. The coal producers, non-bank lenders, office-related REITs, and large diversified miners. All of the stocks of these companies have some pretty sustainable dividends, but the share price is either down or there’s some other issue going on, which means that if you buy them now, you can enjoy a pretty good yield.
So, let’s talk about coal, first of all. Nothing much that’s new here. Coal has gone to a discount in the mind of most investors for a while now. For obvious reasons, thermal coal is not something that policymakers want to use much more of to keep the lights on, although I think it’ll be with us for a while yet. That means that established coal miners, they’ve seen a lot of institutional investors disengage from those stocks. But at the same time, the price of coal went up over a year ago and it stayed up fairly strongly. That means you could buy Terracom, for instance, at 55% yield, if that dividend is sustainable. Yancoal with all its juicy Hunter Valley coal mines, for 20%, Coronado Bowen Basin, same deal with New Hope, 21 and 16. Marc, how’d you like to enjoy those dividends in your portfolio?
Marc: Yeah. Look, it sounds very nice. Obviously, the question is, what’s going to happen to coal prices in the sort of the medium-term, and what’s going to happen to those dividends, right?
Stuart: Right. So, my theme is that coal will obviously cycle up and down depending on demand from our major trading partner in China. But on average, coal prices will be higher than a lot of people expected they will be because most of the world is underinvested in coal mines. So, if you’ve got established coal production, you’ve got stay-in-business CapEx, but you’re not spending big on expansion CapEx. So, the cashflow for these kind of companies is huge. So, combine the low market cap because of the sentiment. And dare I say, in many cases, it’s woke sentiment.
And woke is not something you really wanna think about when managing a portfolio. I don’t mean trade against your ethics, but I mean, don’t swallow wholesale some other person’s idea of woke. You combine those three together, the coal companies just went wonderful dividend place. So, requires a bit more investigation, but if you get the sense that the kind of money that the coal mining companies made over the last year or so is sustainable, then these should be part of your portfolio, at least consider it.
Next one, I’d say is non-bank lenders. The whole financial landscape’s taking a big shake-up just lately. We’re seeing Judo Bank, for instance, invade the realm of the traditional banking world, but it’s the non-bank lenders that have had a lot of the running. By the way, that’s a mistake there. That’s about 11.2%, not 112%. We made an error there. The point is, you can get these kind of stocks on wonderful dividends at the moment on fear that there’ll be a recession and that that will impact their credit risk. And Liberty, of course, has had trouble with a hack just recently. I don’t think that’s a game changer for them necessarily, because all sorts of organizations are getting hacked. But the point is that the market is jittery about non-bank lenders. So, if these people are growing their loan book at the pace at which they’ve been able to do it in recent days, then you could find some decent yields in this sector.
Third one is office-related rates. While we were locked away during the bad old time days in COVID, everyone was concerned that CBD office property or office property generally was not gonna be the money maker that it used to be. We’re seeing that with stock like Cromwell, we can get a 10% yield. And trading well below it, it’s net asset backing. So, the concern is that not enough people will be using offices in the future to make it worth people’s while. Now, look at us, Marc, we do a hybrid model. I’m in the office at the moment, you’re at home, but we are using our office every day and we’re paying good money to actually access that office. So, if the world has gone hybrid like we are, it still means there’s demand for office property. It just means those office properties are probably better utilized than they used to be. So, if that’s the case, then some of these rates could provide you a good running yield, as well as be available at a pretty significant discount to NTA. And this one’s trading at, I believe, about 20 or 30% discount to NTA, so well worth checking out.
And finally, I’d say the diversified miners. They’re always good dividend yields because the cash flow pays for the modest amounts of expansion CapEx these companies routinely engage in, plus their exploration, plus stay-in-business CapEx, and you’re still making out reasonably well. So, as long as commodity prices on average are doing okay, and the company’s staying ahead of the game on inflation, then BHP and Rio should be part of a lot of people’s portfolio just for the dividends. My father would be very pleased to hear this. As a lifetime BHP employee, he’d be pleased to see that his old company’s still a mainstay of a lot of investors’ portfolios.
Marc: All right. Good stuff. So, yeah, there’s more choice out there than just the big banks for proper dividends?
Stuart: Absolutely. And it used to be, yeah, you had to own banks just for that reason. Turns out there are other sectors now that are being neglected, but are continuing to generate good money. So, that’ll be something we’ll do a bit more exploration on in the near future.
Marc: All right. Then moving to coppers, Stuart, we, at “Stocks Down Under” have been looking a lot recently at lithium, cobalt, nickel, copper, all that sort of stuff, well, especially the first, well not copper, but especially the other three taking a big hit in terms of pricing. So, tell us about copper, why we still have to love the red metal.
Stuart: Why we love the red metal. Copper is one of those long-term metals you wanna stay focused on and screen out some of the noise because we’re going through a step change in the use of the metal. It’s a standard industrial metal because wiring shows up in buildings are just about everywhere. Then there’s the electric vehicles that are gonna demand a whole lot more of it. That’s the demand side. On the supply side, the traditional suppliers aren’t supplying nearly as much red metal as they used to. So, the supply-demand dynamics are a medium-term play in copper that we continue to like. That’s the price of the commodity at the moment.
Since the beginning of the year, it’s kind of eased back. I’d wanna be careful about what the market activity is doing right at the moment. But I think there’s the phenomenon of selling may go away that’s going on. A lot of commodities tend to be weak between the months of May and October, mainly because of the northern summer tending to impact on industrial activity. I think that’s what’s going on here. The underlying fundamentals for copper are great. The sucking sound you can hear coming outta China is the world running out of inventories of copper. They haven’t been this low since about 2006.
Now, obviously, they’re a temporary phenomena. The premium that you pay at the port of Yangshan, near Shanghai, to import copper has gone down compared it was three months ago. So, they’re short-term phenomena, and it all depends on the seasonality of the Chinese economy. But if China is back up and running at its old pre-COVID growth rate, then I think the sort of weakness we’ve been seeing in the near term in copper is fairly temporary. And what I’ll remind you of, and here’s the stats, typical internal combustion engine needs only 23 kilograms of copper. Switch to a hybrid, you’re suddenly using 40. Plug-in hybrid, 60. Battery electric vehicles, the stuff that, Marc, you, and I, are gonna be buying sometime in the future, 83 kilograms. So, something like a three or four-fold increase in the number of copper for every car we buy. As our driving habits switch over to the new battery-electric vehicles, we’re seeing more and more of on the road.
So, copper is very much a 21st-century metal. I mentioned before that supply is an issue. Traditionally, it takes about seven to 10 years to develop a decent copper mine. And this metal has been underinvested in recent years. But here’s the game changer. Chile is governed by a very left-wing government that just chose to nationalize its lithium sector, as in, it’s now asserted control over lithium and the private sector operators are welcome to come in and contract with Chile, the state of Chile as the owner of those assets. The copper mines in Chile are still state-owned. I think in an inefficient not so well governed Chile, you’re going to see further declines in output of copper. And so, the owners will be on other regions to step up to the plate in that score.
And if they can’t do it, then you’re in trouble in terms of the supply side of the copper equation. Now, there’s the chart of BHP. BHP hadn’t had a pretty good year. Well, it’s been a bit weak in line with that copper price, but I remind folks that not long ago, BHP closed on the Oz mineral steel. They had to haggle to get control of that asset, but they did it for three big copper mines in South Australia. That’s telling you what the big Australian thinks about the future of this metal. And so, it’s a reason to keep following copper.
Let’s talk about some of the plays. Coda Minerals, we recently did an interview with managing director, Chris Stevens, talking about his wonderful Elizabeth Creek copper project in South Australia, which by the way, has a heck lot of cobalt in it. So, great credits there. Sandfire is always a good one to look at at the right time because it’s got copper projects on three continents. 29Metals with the Capricorn Mine up in Queensland and Austral Resources with Lady Annie. Gotta be careful with copper. China has a way of monkeying around in the near term with commodity prices. And no one’s really truly understanding what’s going on in terms of how strongly they’re coming out of the lockdowns we saw only a few months ago. But once it’s clear that China is up and running again, maybe we’ll see that by about October. Then you’re gonna wanna be invested in copper in some way.
Marc: All right. Good stuff. I think that’s it for this week. So, thanks everyone for watching. We’ll see you next week. And hopefully, we have some news in the tech space as well. In the meantime, happy investing, and we’ll see you next week.
Stuart: Happy investing. Stay bullish.