Specialist in Asia Pacific, China, India and South East Asia and Global Emerging Market equities.

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formerly Realindex Investments

Leader in active quantitative equities across Australian equities, global equities, emerging markets and global small companies.

Backed by a unique blend of research, portfolio construction and risk management, focused on uncovering original insights and translating them into investment strategies that are active and systematic, aiming to generate alpha.

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At Stewart Investors, we believe in putting people first. Our investment world-view is of a series of partnerships – with each other, with our clients, with the companies we invest in, the people who buy their goods and services, and with the wider society in which we all live and work.

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Dividends, disruption and star performers: FY20/21 Reporting Season Wrap

Despite straddling two of the most disrupted years in living memory,
the FY20-21 reporting season was overall very positive. 

In our analysis, around one-third of companies [that we cover] surprised us on the upside, around one-third delivered in line with expectation, and one-third were below expectation. 

Our investment approach focuses on selecting companies with strong return on equity and return on invested capital, and these companies delivered superior returns overall. We actually saw EPS grow by 26% over the previous corresponding period, and expect a further 20% growth in the financial year ahead. Put simply, investors in quality stocks were rewarded by strong performance through the reporting season. We were also pleased to see that overall, Australian companies have strong cashflow and balance sheets. 

Bumper dividends welcome, but not permanent

With strong cashflows and robust balance sheets, Australian companies paid out approximately $38bn in dividends, more than twice the amount of 12 months ago1. While this was good news for investors, we don’t see it as a long-term trend. We prefer companies retain cash if they have attractive reinvestment opportunities, if not that cash should be returned to shareholders in the most tax effective manner.

Miners benefited from high commodity prices, and resisted the temptation to parlay that into questionable acquisitions, which they have done in the past. Banks raised provisions to cope with COVID disruption, but didn’t need to use the capital, instead are now deploying it into share buybacks and dividends.

Economic conditions remain strong

Of course COVID lockdowns are impacting our two largest states, NSW and Victoria. However, there are several factors that demonstrate underlying robustness in the economy. These include:

  • House price rises, and activity accelerating to higher levels
  • Credit growth accelerated to 4-5% in the reporting period, and is on track to hit 7-8% going forward
  • Iron ore prices still elevated – although well down from recent highs
  • $20-25bn in fiscal government support for the current lockdowns
  • Ongoing infrastructure spend driven by government, with many projects gathering pace now.

Inflation is a key risk that we are monitoring, although at the moment, central banks are forecasting that price rises will be transitory. We also think that there will be sufficient productivity gains and only moderate wage growth to balance out inflationary forces. We expect central banks to be quite tolerant of inflation and slow to raise interest rates, if it appears.

Australia is more than just banks and miners

The latest earnings announcement underline the fact that Australia has a broad universe of quality companies to invest, across sectors as diverse as technology, healthcare, consumer staples and financials2. We don’t dismiss the banks and large mining companies – but we think there is a great menu of companies with a lot to offer investors, and it is upon us as active managers to find and invest in these opportunities.

Our portfolio features a number of companies that have:

  • Expanded successfully internationally – e.g. CSL, James Hardie, Domino’s Pizza
  • Built sound domestic businesses – e.g. Cleanaway,  REA Group,  
  • Accelerating growth opportunities – e.g. Afterpay, Wisetech, IDP Education. 

We highlighted four companies we like in our February earnings season presentation, and these all proved to be standout performers in the subsequent six months.

  • Domino’s Pizza: FY21 NPAT +43%; Japan & Western Europe sales and store roll-out accelerating.
  • Wisetech Global: FY21 NPAT +101%; Progressing on its goal “to be the operating system for global logistics”. 
  • ALS: FY21 NPAT +35%; Growing beyond its commodities testing business into life sciences.
  • Bluescope Steel: FY21 NPAT more than tripled; investing in its North American and Australian steel capabilities.


Another four strong performers we highlight are: 

Steadfast Group – The nation’s largest network of insurance brokers, used mainly by small-to-medium businesses. The company is growing consistently and delivered return on equity of 14% in the reporting period. We like its approach to sustainable growth.  

Cleanaway – This is a well-integrated business providing services all along the value chain of waste management, including waste collection, recycling and landfill. It is in the process of acquiring several Sydney landfill and transfer station assets from Suez. We believe this will be earnings accretive and helps to position the company for growth.

OZ Minerals – An independent miner with strong exposure to the growing copper market, which will be a core part of the global move to Electric Vehicles. The company has a number of existing, de-risked copper mines and potential to open a new one in WA, which we believe makes it well-placed for future growth. 

IDP education – This international English language testing and student placement company is a world leader in the space. Even with the challenges of Australia’s closed borders, it has been able to grow the placement of students into the UK and experienced lower declines into Canada. While COVID has led to a short-term dip in earnings, our view is that IDP will continue to grow well in the long term.

We continue to emphasise Australia’s ability to generate quality companies to invest in. Overall, we are pleased with the performance of our portfolio and our outlook is positive in terms of growth and returns.  


  1. Source: Macquarie research report. 30 August 2021.
  2. No fund or stock mentioned in this article constitutes an offer or inducement to enter into any investment activity.
  3. Company results sourced from FY20-21 company reports

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This material has been prepared and issued by First Sentier Investors (Australia) IM Ltd (ABN 89 114 194 311, AFSL 289017) (FSI AIM), which forms part of First Sentier Investors, a global asset management business. First Sentier Investors is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG), a global financial group. A copy of the Financial Services Guide for FSI AIM is available from First Sentier Investors on its website. 

This material is directed at persons who are ‘wholesale clients’ (as defined under the Corporations Act 2001 (Cth) (Corporations Act)) and has not been prepared for and is not intended for persons who are ‘retail clients’ (as defined under the Corporations Act). This material contains general information only. It is not intended to provide you with financial product advice and does not take into account your objectives, financial situation or needs. Before making an investment decision you should consider, with a financial advisor, whether this information is appropriate in light of your investment needs, objectives and financial situation. 

Any opinions expressed in this material are the opinions of the individual author at the time of publication only and are subject to change without notice. Such opinions: (i) are not a recommendation to hold, purchase or sell a particular financial product; (ii) may not include all of the information needed to make an investment decision in relation to such a financial product; and (iii) may substantially differ from other individual authors within First Sentier Investors. 

To the extent permitted by law, no liability is accepted by MUFG, FSI AIM nor their affiliates for any loss or damage as a result of any reliance on this material. This material contains, or is based upon, information that FSI AIM believes to be accurate and reliable, however neither MUFG, FSI AIM nor their respective affiliates offer any warranty that it contains no factual errors. No part of this material may be reproduced or transmitted in any form or by any means without the prior written consent of FSI AIM. Any performance information has been calculated using exit prices after taking into account all ongoing fees and assuming reinvestment of distributions. No allowance has been made for taxation. Past performance is not indicative of future performance. 

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