Switzer TV | Marcus Bogdan: CBA & TLS Full-year Results

Marcus Bogdan, Portfolio Manager of the Switzer Dividend Growth Fund (Quoted Managed Fund) recently spoke to Peter Switzer on Switzer TV to discuss the Commonwealth Bank of Australia’s (CBA) and Telstra’s full-year results.

Watch the full interview here:

Video Transcript

Peter Switzer (PS): Joining us now for our regular catch-up is Marcus Bogdan, who is the Portfolio Manager of the Switzer Dividend Growth Fund. Because he’s an expert on dividend-paying stocks, I’d like to occasionally catch up with him and see what’s going on. Of course, in reporting season, a lot is going on. Marcus, thanks for joining us.

Marcus Bogdan (MB): Thank you Peter, good to be here.

PS: Okay, let’s talk about some of the releases so far. We saw a big one yesterday with the CBA, a couple of big ones and small ones Let’s start with the CBA. First of all, the dividend, it will make you smile as a dividend collector.

MB: Absolutely, it was ahead of the earnings and the dividend were ahead of market expectations. That reflects the underlying strength of the CBA franchise, where they’re delivering above system growth, both in home loans and business, and very strong deposit growth as well. It was a premium result. Dividend was $2 plus a $6 billion buyback. Given the strength of the capital position of CBA, the expectation is that there’ll be further buybacks going forward.

PS: Yeah, so does the buyback directly affect the fund or only indirectly? In the sense that the share price could be affected.

MB: It affects the share counts, the number of shares that are issued by CBA – that share count will be reduced to around 4 or 5%, which will certainly benefit the earnings growth for CBA going forward. It’s a net positive for our investors.

PS: Okay, today we also got news from Telstra and Telstra clearly is in the fund, being a big dividend payer.

MB: Yes.

PS: Well, let’s go there.

MB: Well importantly, they maintain the 8 cents dividend and they also announced a $1.5 billion buyback. That was from the proceeds from the sale of their mobile towers business. For the first time in many years, operationally, you are starting to see some improvements there. A good strength there in the mobile business, and very strong cash generation from the business, which underpins that dividend yield there of around 4.2% fully franked.

PS: Yeah, Telstra has been a great disappointer, but at the moment, you’re getting stock price growth and you’re getting a solid dividend. So, it’s an overdue win-win situation with Telstra for you guys.

MB: Absolutely. It’s probably looking the best it has looked for a number of years. I mean, there’s still challenges in that marketplace, but I think as an industry, there’s much more rationality in the mobile players and Telstra now are very focused on capital management and returns to shareholders, which is encouraging.

PS: Yeah, Goodman Group is not renowned for its dividend pay history, but you do have it in the fund, and it did report well?

MB: It did, it’s probably in the best position in terms of where real estate is. They’re a global leader in warehousing and in logistics. They’re a real beneficiary of digitalisation and this real push to online. They are delivering earnings per share growth of 10% plus per annum, they do pay a dividend to shareholders. Why we do like them, is that they’re absolutely in a sweet spot in terms of the new economy. They’ve got a very strong balance sheet and they’re a global leader in logistic warehousing.

PS: Yeah, but it’s function in the Switzer Dividend Growth Fund is more for its growth rather than it’s dividend.

MB: Yeah, so obviously the growth underpins the dividend going forward as well, those two things are always very strongly linked.

PS: Yeah, some may understand, but you can sell a stock that has had fantastic capital growth to enhance the dividend that you pay to the unit holders.

MB: Indeed you can, yes.

PS: So, people watching this might be thinking well, when does the Switzer Dividend Growth Fund tie out next time? Clearly, we were going through a period of great dividends, even though I know you’re a brilliant crystal ball guy, when it comes to what companies will pay. This is like, you’re in the thought this a year ago that the dividends would be so good – when does the Switzer Dividend Growth Fund actually pay its next dividend?

MB: You make a really important point because both earnings and dividends have been substantially better than where we would have thought a year ago and we’re seeing earnings growth of 25% plus expected for this results period. That will be reflected in the dividend growth as well. For the investors, they get the dividends paid on a quarterly basis, so the next payment for the dividends will be on the 30th of September.

PS: When we created this fund, it was meant to be a very safe, secure type of albeit in the stock market type fund, of course the Coronavirus took a share price or the unit price down quickly, but I’m really happy that it’s rebounded to the all-time high of $2.77 today. That’s good to see.

MB: Absolutely, it’s also important to know that in the portfolio, the composition around quality companies that have been very resilient earners – that resilience of earnings is so important in maintaining and growing dividends. Investors will be well aware of companies like Wesfarmers, Brambles, Woolworths and Coles that have been able to maintain and grow their dividends even throughout the COVID period.

PS: Yeah exactly, right. Marcus, thanks for joining us. Talk in a few weeks’ time.

MB: Thanks pleasure, Peter.

DISCLAIMER: AGP Investment Management Limited (AGP IM) (ABN 26 123 611 978, AFSL 312247) is a wholly owned subsidiary of Associate Global Partners Limited (AGP) (ABN 56 080 277 998), a financial institution listed on the ASX (APL). AGP IM is the Responsible Entity and Blackmore Capital Pty Limited is the investment manager of Switzer Dividend Growth Fund (Quoted Managed Fund)(ARSN 614 066 849)(the Fund).

This material has been prepared for general information only. It does not contain investment recommendations nor provide investment advice. It does not take into account the objectives, financial situation or needs of any particular individual. The views, comments and analysis are those of the investment manager as at the date of publication and are subject to change without notice. Neither AGP IM nor AGP gives any warranty as to the accuracy, reliability or completeness of information contained in this material. Investors must, before acting on this material, consider the appropriateness of the material.

Neither AGP IM, AGP, their related bodies corporate, entities, directors or officers guarantees the performance of, or the timing or amount of repayment of capital or income invested in the Fund or that the Fund will achieve its investment objectives. Past performance is not indicative of future performance.

Any economic or market forecasts are not guaranteed. Any references to particular securities or sectors are for illustrative purposes only and are as at the date of publication of this material. This is not a recommendation in relation to any named securities or sectors and no warranty or guarantee is provided that the positions will remain within the portfolio of the Fund.

Investors should seek professional investment, financial or other advice to assist the investor determine the individual tolerance to risk and needs to attain a particular return on investment. In no way should the investor rely on information contained in this material.

Investors should read the Fund’s Product Disclosure Statement (PDS) and consider any relevant offer document in full before making a decision to invest in the Fund. The Fund’s Target Market Determination and other relevant information can be obtained by visiting www.associateglobal.com. All numbers included in this document are sourced from Blackmore unless otherwise stated.