The Australian stock market has shown resilience with a 7.0% increase over the past year, despite a flat performance in the last week, and earnings are expected to grow by 13% annually. In this context, dividend stocks can be particularly appealing as they offer potential for steady income streams and can serve as a buffer in varied market conditions.
Overview: Australian Foundation Investment Company Limited, a publicly owned investment manager, operates with a market capitalization of approximately A$9.26 billion.
Operations: Australian Foundation Investment Company Limited does not have detailed revenue segments provided in the text.
Dividend Yield: 3.4%
Australian Foundation Investment (AFI) offers a dividend yield of 3.45%, which is lower than the top Australian dividend payers. Despite a stable history over the past decade, AFI's dividends are not well covered by free cash flow or earnings, with payout ratios of 110.3% and 77.7% respectively, indicating potential sustainability issues. Recent financials show a decline in revenue and net income from A$350.01 million and A$309.76 million to A$339.26 million and A$296.17 million respectively, year-over-year.
Overview: Ampol Limited, operating in Australia, New Zealand, Singapore, and the United States, engages in the purchasing, refining, distribution, and marketing of petroleum products with a market capitalization of A$7.94 billion.
Operations: Ampol Limited generates revenue through its Z Energy segment at A$5.51 billion, Convenience Retail at A$5.99 billion, and Fuels and Infrastructure at A$33.63 billion.
Dividend Yield: 8.3%
Ampol Limited, despite a dividend yield of 8.26%, faces challenges with sustainability and reliability in its dividend distributions. The company's dividends are not well covered by earnings, with a high payout ratio of 93.3%, and have shown volatility over the past decade. Additionally, Ampol trades at 24.3% below estimated fair value and carries a high level of debt, which could impact future financial stability and dividend payments. Recent board changes also add an element of uncertainty to the governance landscape.
Overview: Fortescue Ltd is a global iron ore company based in Australia, focusing on the exploration, development, production, and processing of iron ore, with a market capitalization of approximately A$62.60 billion.
Operations: Fortescue Ltd generates revenue primarily from its metals segment, which brought in A$18.47 billion, and a smaller contribution from the energy sector at A$79 million.
Dividend Yield: 10%
Fortescue's dividend history shows growth over the last decade, but with volatile payments. Currently trading 21.2% below its fair value, it offers a yield of 9.99%, placing it in the top quartile of Australian dividend stocks. However, forecasts suggest a potential earnings decline averaging 22.9% annually over the next three years. Dividends are supported by both earnings and cash flows with payout ratios at 74.2% and 73.1%, respectively, though this could be challenged by future earnings decreases.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include ASX:AFI ASX:ALD and ASX:FMG.
