Energy dividends; global equities rally; cash splash ahead of Budget 2022: What we learned this week

Woodside pays record dividend—more on the way?

Woodside Petroleum’s (ASX: WPL) second-highest dividend ever hit shareholders’ pockets on Wednesday. The fully-franked $1.46 per share dividend rests on high prices for Woodside’s natural gas and oil. However, the average US$60.3 per barrel of oil equivalent Woodside received in 2021 already looks dated. Between October and December, Woodside was already reporting average prices at US$90. Is another record on the cards in 2022? Brent crude oil is up 53% this year; Asian liquified natural gas, 49%. Expect Woodside’s Q1 results next month to make headlines.

Investor losses narrow as global equities rally

Global share markets are rallying sharply after a painful start to 2022. Benchmarks in Australia, the US and Europe are up between 5% and 10% since early March. The battered Nasdaq Composite is up 13% alone in the last eight trading days. Market commentators put the rebound down to discounted valuations, a strong US economy, easing energy prices and policy support for markets in China. But, with war raging in Ukraine, energy prices rising again and inflation still at record highs, markets are likely to remain volatile.

Will Hamish return?

That’s the question investors are asking after news broke on Monday Hamish Douglass had resigned from the Board of Magellan Financial Group (ASX: MFG), further distancing himself from the company he co-founded in 2006. Citing his previously announced indefinite medical leave of absence as chief investment officer, the terse three-sentence statement left investors with little idea about how permanent the exit will be.

Douglass’ departure may finally slow the stream of negative headlines that have taken shares to the lowest level since late 2014. However, a share price recovery will require a performance rebound for its funds. Morningstar’s Shaun Ler thinks it’s likely given the flagship Global Equity strategy’s portfolio of undervalued names.

Casinos can’t get it right

Dragged before three royal commissions, Crown Resorts (ASX: CWN) stands accused of having made life easy for money launderers and organised crime. The process humbled James Packer and contributed to the casino’s sale to US private equity group Blackstone. Star Casino joined it in ignominy this week. An inquiry found the casino, operated by Star Entertainment Group (ASX: SGR), let a tour operator with links to criminal gangs run games in a private room where cash was possibly being laundered. Putting aside the Déjà vu, Morningstar’s Angus Hewitt expects short-term volatility but ultimately that the operator will keep its license. He made no change to fair value.

Green stock picker hits the ASX

Investors who want their money to support action on climate change and a cleaner planet got another option this week. Nanuk Asset Management’s active ETF, New World Fund (ASX: NNUK), hit the exchange on Monday promising to deliver a strategy that “invests in listed companies exposed to the broad themes of environmental sustainability and resource efficiency”. Most sustainable ETFs are passive vehicles and use pre-set rules to pick stocks that match their values. Nanuk’s stock pickers invest across areas like clean energy, healthcare, industrial and energy efficiency. Founded in 2009, the unlisted version of the strategy has a neutral rating from Morningstar.

Government woos with budget

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Cash for pensioners, an acceleration of childcare subsidies and temporary cuts to fuel taxes are among the measures expected in the Federal Budget next week as living costs rise on the eve of an election. Pensioners are set to receive a $250 one-off cash bonus. A temporary reduction in the 44.2 cents per litre fuel excise is also being mulled. However, soaring international oil prices limit what the government can do short of directly subsidising fuel. Completely removing the fuel excise would only take national petrol prices back to early-February levels.

Wheat prices begin to bite

Egypt asked the International Monetary Fund for assistance on Wednesday as the world’s largest wheat importer battles surging prices. Around 70 million people are fed through a subsidised bread program that relies heavily on wheat supplies from Russia and Ukraine. International wheat prices have risen 43% this year over fears war could disrupt wheat exports from the Black Sea region, which accounts for roughly a third of world production. Local leaders will watch nervous as soaring food prices contributed to 2010’s Arab Spring, mass protests that toppled leaders in Egypt, Tunisia, Libya and sparked Syria’s still-ongoing civil war.

ASX breaks even: Market recap

Australian shares ground higher this week, clawing back losses notched during January’s selloff to break even for the year. The ASX is the first and only major index to reverse the year’s declines.

The S&P/ASX 200 finished up 0.3% on Friday for a gain of 1.5% over the week. Gains were led by materials, energy and utilities, up between 5.2% and 5.7%. Technology stocks reflected the strong lead from the Nasdaq and gained 3.5%.

Local markets were buoyed by continuing strength in commodity prices, currently on track for their best year since 1915, says Aaron Binsted, a portfolio manager at Lazard.
Woodside Petroleum, BHP, Rio Tinto and Fortescue metals all rose between 2% and 8% this week.

Equity markets remain unperturbed by a historic selloff in global bond markets, but sentiment could shift quickly, notes Binsted. Hawkish comments from US Federal Reserve Chairman Jerome Powell on Monday triggered a sharp selloff in global bond markets.

“I would argue if something big like that is happening, then saying ‘everything is fine the ASX is up for the week’ may not make much sense,” he says, noting global bond indices are on track for the worst year since 1949.

“Equity markets typically start responding later in hiking cycles. People always say sell equities at the last rate hike [of the cycle], and that’s really great but it’s not obvious what is going to be the last one.”

Retailer JB Hi-Fi soared 11% this week after reporting double-digit sales growth in Q3 as consumers continued to load up on appliances, electronics and whitegoods.

“Is this the last shoe to drop on this covid boom or is there some structural long-term change in how we spend money and this is a new normal,” says Binsted.

Other moves this week

  • Magellan Financial Group 10.7%
  • Pendal 7.2%
  • Telstra 1.8%
  • Ansell 1.5%
  • AGL 7.6%
  • Endeavour Group 1.3%
  • NAB ↑ 1% / Westpac ↑ 0.4% / CBA ↓ 0.35% / ANZ ↓ 0.1%

What we’re watching next week

  • Monday: BHP pays its record dividend to shareholders
  • Tuesday: Federal Budget
  • Wednesday: AGL, Aurizon, Commonwealth Bank and Wesfarmers pay dividends

What we’re reading/listening to this weekend

BlackRock Chairman Larry Fink’s letter to shareholders; What economists want from next week’s budget; Is China’s economic model sustainable: A debate; Did Putin invade because oil prices were high?; Nicholas Cage is finally out of debt; Refugees set to leave Nauru; Super contribution and asset transfer FAQ; Private equity in a portfolio

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