Dividend Track Record
Companies with a history of consistently growing dividends per share should be preferred over those with more erratic track records. Volatile dividend payouts are indicative of cyclical companies which are subject to external pressures outside their control.

Compare the consistent growth from Telecom to the cyclical swings from Carter Holt Harvey in the following charts showing the dividends per share over the 1990s.

Do Not Calculate This Year's Yield Using Last Year's Dividend
It is very important to ascertain the expected dividend payout for the current year and make an estimation of the dividend yield on this basis. It is dangerous to make assumptions based on last year's dividend payout. For instance, The Herald dated 22 April has the dividend yield for Trans Tasman Properties (based on the past 12 months dividend payments) recorded as 6.25 per cent. In reality, Trans Tasman Properties will not be paying a dividend this year and is not expecting to make any dividend payments until the second half of 2000. Clearly, a more accurate current yield on Trans Tasman is zero.

Fundamental Research On The Company
Elements such as the quality of management, the outlook for the industry or sector in which the company operates and the company's growth strategy are all very important matters to consider. They are impossible to measure numerically but without an understanding of these elements all other numerical analysis can be meaningless or even misleading.

A Sample Of Quality Dividend Stocks
The companies listed below have, in our view, a good combination of high relative yield, dividend track record and payout ratio, together with a sound fundamental outlook, and should continue to provide investors with relatively high dividend yields. Once again, the property companies and trusts should be considered carefully in light of their higher payout ratios which may impact on future dividends.

For investors who do not have an immediate requirement for high income there is an alternative to these high income companies that can be particularly worthwhile over time. It necessitates foregoing a high dividend yield now for a higher one in the future. Investors who purchase quality growth stocks such as Auckland Airport or The Warehouse can expect greater total reward (via income and share price appreciation) and higher actual income in 5 years time.

For instance, The Warehouse distributed 14 cents per share over 1998 and has a current dividend yield of 5.1 per cent. Over the past 5 years the company has increased dividends per share by over 50 per cent a year. If it can maintain growth at half this rate it will result in a dividend of 42 cents per share in 2003 and a gross yield of 9.0 per cent for investors buying shares at todays' price of $7.15.

Likewise, Auckland Airport is expected to distribute 5.5 cents per share over 1999 and at the current price of $3.05 is trading on a gross yield of 2.7 per cent. Should Airport achieve a growth rate of 20 per cent per annum the dividend in 5 years' time will be 13.6 cents per share, resulting in a gross yield at that time of 6.7 per cent.

*The Sky City Instalment Receipts are partly paid and require a final payment of $3.55 per share due in March 2000. At this time the yield will revert to that of the ordinary share which is currently running at 7.9 per cent.

**Wilson & Horton is an exchangeable preference share. One WHHPA either converts into one share in the Irish parent, INWS (the current price of INWS is £3.10, which equates to approx. NZ$9.00), or the holder can elect to redeem it for its cash face value of NZ$8.00. The share matures/converts on 30 November 2003. WHHPA pays a fixed annual dividend of 40¢ (20¢ each in November and June). Each dividend payment will carry full imputation credits provided that earnings and tax payments by INWS subsidiary, Wilson & Horton, owner of the NZ Herald, do not significantly fall, or that INWS otherwise ensures that NZ tax payments are sufficient.

This newsletter is a condensed version of Craig & Co's NZ Dividend Trends Book.

Disclaimer: While this report is based on information from sources which Craig & Co Limited considers reliable, its accuracy and completeness cannot be guaranteed. Craig & Co Limited, its partners and employees do not accept liability for the results of any actions taken or not taken upon the basis of information in this report, or for any negligent mis-statements, errors or omissions. Those acting upon information and recommendations do so entirely at their own risk. Craig & Co Limited and/or its partners and employees may, from time to time, have financial interest in respect of some or all of the matters discussed.