MARKETS SPECTATOR: Banking on a dividend

The stock market is being pushed into the black today on the back of bank and retail stocks as the investor chase for yield continues.

Bank and retail stocks pushed the benchmark index higher after midday after Lend Lease fell the most since August 2011 following its statement that the construction markets in Australia, Europe, Middle East and Africa have “softened”.

At 1317 AEST the S&P/ASX200 Index was up 201.943, 0.4 per cent to 4812.70 after falling as much as 1 per cent to 4743.30 earlier in the session. The Australian dollar’s climb to 96.09 US cents from US cents 93.34 on Tuesday, June 11, has also boosted investor sentiment and may indicate some selective buying of local stocks by foreign fund managers.

“This market is going up the same reason it’s going down: uncertainty,” says Tony Paterno, senior client advisor at Ord Minnett in Melbourne. “The market is focused on dividends rather than stocks”.

Banks have been among the most favoured dividend stocks. ANZ and NAB have this year increased their dividend payout ratios towards 80 per cent of net profit. Bank businesses are seen as relatively stable in terms of earnings compared to other sectors such as mining, mining services and construction.

Shares in ANZ rose are on track for their third consecutive rise having gained 6.9 per cent since Thursday, June 13. The stock was up 55 cents, or 2 per cent, to $28.37.

Commonwealth Bank shares gained $1.06, or 1.6 per cent to $68.16. The stock is up 4.6 per cent since June 13. National Australia Bank stock added 57 cents, or 1.9 per cent, to $29.95. The shares are up 6.8 per cent since June 13.

Westpac shares rose 50 cents or 1.7 per cent to $29.44. The stock has risen 7.2 per cent since June 13.   

Woolworths shares added 33 cents, or 1 per cent, to $32.41 as investors sought stocks who they had reasonable certainly could deliver predictable earnings because of their leading market position.  Wesfarmers, which owns Woolworths supermarket rival Coles, rose 23 cents, or 0.6 per cent, to $38.58.

Lend Lease shares plunged as much as 8.3 per cent to $8.57 after the company said weak business conditions in Australia, the Middle East, Europe and Africa will reduce earnings in the six months to June 30 this year. The stock was down 49.5 cents, or 5.3 per cent, to $8.855 at 1320 AEST.

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