Finweek English Edition - - COMPANIES & INVESTMENTS - Marc Ash­ton

The Sa­trix Divi ex­change-traded fund (ETF) has been one of the most pop­u­lar tools among in­vestors over the last few years as they have sought div­i­dends to bol­ster their port­fo­lios. How­ever, with a yield of around 2.9% on the bas­ket, there is some cyn­i­cism about its abil­ity to de­liver the best in­come re­turn.

How­ever, com­mu­ni­ca­tions spe­cial­ist Grant Henry from Com­mu­ni­ca­tions Ad­vi­sory, who is nei­ther a rep­re­sen­ta­tive of San­lam nor Sa­trix, alerted Fin­week to an in­ter­est­ing piece of re­search he had done on the ETF that might sug­gest the prod­uct is of­fer­ing value. Ac­cord­ing to Henry’s re­search, the for­ward div­i­dend yield on the cur­rent bas­ket of Sa­trix Divi shares is 5.9% and the 1-year for­ward earn­ings mul­ti­ple is around 11 times earn­ings.

Henry cal­cu­lated this by tak­ing 1-year for­ward an­a­lyst earn­ings con­sen­sus fore- casts. As the bas­ket stands right now, of the 30 stocks there are 15 sit­ting with “buy” rec­om­men­da­tions on them, 14 with “Hold” and a sin­gle stock with a “Sell” rec­om­men­da­tion (Fos­chini).

He does how­ever ac­knowl­edge that th­ese num­bers are slightly skewed by the con­tri­bu­tions of the likes of African Bank In­vest­ments Limited (Abil) and JD Group. Presently Abil (with a for­ward div­i­dend yield of 15% and a for­ward P/E mul­ti­ple of 3.4) and JD Group (10% and 5) are ex­pected to trim their div­i­dends go­ing for­ward as earn­ings come un­der pres­sure. How­ever, by Fin­week ’s cal­cu­la­tion you still get an over­all yield of around 4% and a P/E of 13, which is roughly in line with his­toric re­turns on the JSE.

The two high­est for­ward P/E mul­ti­ples for the ETF are Coro­na­tion (20 times) and Wool­worths (19.6) while the low­est for­ward div­i­dend yields (ac­cord­ing to an­a­lyst con­sen­sus) in the bas­ket are Gold Fields (3.7%) and Wool­worths (3.8%).

For in­vestors who are wor­ried that the cap­i­tal growth ref lected in shares over the last year is un­sus­tain­able, they could look at the Sa­trix Divi ETF as a nice way to hedge them­selves. If busi­nesses are look­ing to re­turn ex­cess cash to share­hold­ers, then who are we to ar­gue?

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