Morningstar runs the numbers
We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 7 February.
We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 7 February.
100
A dividend payout ratio over 100 may indicate that a company’s dividend is in jeopardy because no company can continue to pay out more than it earns indefinitely. Across the Morningstar Australia GR AUD Index, the payout ratio averages around 74 per cent. The payout ratio is a key number in evaluating dividend safety. But it's not the only stat to consider. "It's the context for the way you think about other aspects of dividend safety,” says Josh Peters, former editor of the Morningstar Dividend Investor newsletter. “But what's a good payout ratio for a utility – say 70 per cent – would be much too high for a steel mill or an oil refiner, which are much more volatile businesses where earnings could be wiped out at the bottom of a cycle and the dividends get cut," he says.
1.7 trillion yuan
Or $364 billion. That’s the amount The People’s Bank of China injected over two days to stabilise markets that had plunged after extended New Year holidays. This triggered a major recovery. For Morningstar head of equity research Peter Warnes, it’s more compelling evidence central banks have the markets’ back, no matter what. The fear the coronavirus will affect global economic growth has hit commodity markets and particularly oil. Benchmarks West Texas Intermediate and Brent have slumped in the past two weeks, both down nearly 20pc since the Iranian commander Qasem Soleimani was killed by a US drone strike. “Oil is the lubricant of the global economic engine and if central banks are going to ensure economic growth is going to be protected at all costs, then oil prices will likely recover,” says Warnes.
Nine
That’s the number of global epidemics since 1998, notes Morningstar Investment Management’s Carolyn Szaflik. From the SARS outbreak in 2003 to the twin strikes of ebola in 2014 and 2016, and a bout of Zika in between, disease has made headlines and jostled markets. But each time, the outbreaks – and the financial losses – were eventually contained. “Market participants tend to react to such unforeseen outbreaks,” says Szaflik, “but markets tend to recover by the six-month mark. This suggests that sentiment drives early losses, but sustained economic impacts are less perhaps investor fears at the onset.”
26 per cent
That’s the discount to fair value for Aussie biotech Avita Medical, according to Morningstar analyst Nicolette Quinn. Avita’s flagship product is RECELL, which creates “spray-on-skin” from a small skin sample in 30 minutes. “Despite a number of new products being approved in the regenerative skin market, we believe that RECELL will gain significant share based on clinical performance, ease of use, and relative price point," Quinn says. “We expect the high forecast uncertainty is the likely reason for the market currently undervaluing Avita, but the latest results suggest approximately 20 per cent market penetration one year into commercial launch which affirms our longer run expectations of the product potential.”
$115 million
That’s the amount of deposits recorded by “neobank” Xinja - a sum it amassed in just 20 days, putting it on pace to reach its goal for the year in just one month. "It's very exciting and probably a little terrifying," said Xinja chief executive Eric Wilson. Neobanks seek to compete on two key fronts: price and technology. As rates plunged in 2019, rates offered on neobanks’ respective savings accounts rose to the top. Savers looking beyond the big banks can secure conditional rates of up to 2.25 per cent. Ratecity research director Sally Tindall says digital start-up banks face an uphill battle to wrestle market share from the big four. "We’re in an age where people are taking to disrupters with huge enthusiasm in other industries,” Tindall says. “But Australians are notoriously loyal to their bank. More than three-quarters of our savings are with the big four and their subsidiaries. Neobanks are unlikely to rock this boat any time soon."
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