Matthew Kidman: Welcome to Buy Hold Sell, brought to you by Livewire Markets. My name is Matthew Kidman, and today we’re going to wind back the clock and talk about dividends. Yes. Remember that? That’s what we used to search for in companies before growth became the dominant theme.
Now it’s back to dividends. And to talk about that, we’ve got Blake Henricks from Firetrail and Michelle Lopez from abrdn.
Matthew Kidman: Never thought I’d be saying this, Cochlear, one of the great growth stories of Australia, not a bad yield. Buy, hold, or sell?
Michelle Lopez (BUY): It’s a buy. So I agree with you. It’s not often I talk to Cochlear as a dividend stock. It isn’t a high-yielding stock, but what it is, is it’s a growth yield and a growth dividend.
This is a company that is spinning off a lot of cash. They’re unwinding their CapEx programme. They’re at the tail end of that so the free cash flow that they’re spinning off is very high. They’ve got $500 million of net cash on their balance sheet.
So I think there’s further growth in the dividend, but importantly, operationally, they’re just executing well. They’re super consistent in what they do. They’ve got a
really clear strategy and invest for the future for growth. So that runway of growth, whether it’s earnings or whether it’s dividends, is very clear. So it’s a buy.
Matthew Kidman: I like that, growth yield. It’s been tough for Cochlear. A couple of years, hospitals closed around the world. Things are opening up. Buy, hold, or sell?
Blake Henricks (HOLD): I think it’s a hold, but I think if you’re buying it for a dividend, I had a look online, and I actually got a three-year term deposit quote from Judo Bank at 1.55 per cent. So that beats Cochlear’s 1.5.
So I think, for a dividend, it’s a sell. But the market’s growing. Their holding share in the US, growing a bit in Europe. It’s fine, but I’m not buying it for dividends.