Dividend boost stokes Auswide rally

George Lekakis Authorised deposit-taking institutions

Auswide Bank is stoking interest from yield-hungry investors after signalling yesterday that shareholders are in line to receive a fatter final dividend when the company announces its full year profit in August.

In a trading update lodged with the ASX, managing director Martin Barrett revealed that loan growth has accelerated in the last five months beyond the 4.9 per cent rate disclosed at the company’s first half profit announcement in February.

The bank is now expecting to report that lending activity will have expanded by around 6 per cent in the 12 months to the end of June.

“Auswide has experienced good growth across its loan book in the second half of FY19 reflecting our strategy of diversifying our lending across geographies and customer segments,” Barrett said.

“We have decided to increase our final fully franked dividend reflecting our confidence in outlook for Auswide”.

A key to Auswide’s growth performance has been its focus on expanding lending activity outside its home market in Queensland.

The Bundaberg-based ADI is actively pursuing business and retail borrowers in Sydney and Melbourne through broker networks.

The upbeat announcement on the trajectory of the company’s operations triggered a rally in the bank’s share price, which in the last month has outperformed most other listed banking stocks.

Auswide’s share price closed up 12 cents or 2.5 per cent to $5 – its highest day close since the middle of April.

The bank paid a final dividend of 18 cents per share in 2018 – up one cent on 2017.

The prospect of another boost to the dividend positions Auswide to potentially overtake the major banks, Bendigo and Bank of Queensland as the highest yielding retail bank stock on the ASX.

Auswide delivered a full year dividend yield of  5.5 per cent in 2018, which is already in line with CBA and ANZ.

However, it is likely to surpass the dividend returns of NAB and Westpac this year given that each of those banks are more likely to lower dividends in response to earnings headwinds.

Recent share price weakness almost guarantees that Bank of Queensland will remain the highest yielding banking stock in 2019.

In 2018 BoQ generated a dividend yield of 8.1 per cent but analysts at Morgan Stanley are forecasting it will fall to 7.3 per cent.