Helia Group Limited (ASX: HLI)
Helia Group Limited is Australia’s leading provider of Lenders Mortgage Insurance (LMI), helping facilitate earlier home ownership for borrowers with low deposit loans.
In an uncertain market where investor confidence is often shaken by economic volatility and shifting policy landscapes, dividend-paying stocks offer a rare sense of stability. One such consistent performer is Helia Group Limited. Despite a challenging year marked by contract exits and government policy overhang, Helia’s robust dividend strategy and strong capital position make it a compelling income play.
The Business Backbone
Helia’s core business revolves around providing LMI, enabling Australians to achieve home ownership sooner by supporting lenders when loans exceed 80 percent of the property value. As of FY24, Helia had over 810,000 policies in-force with insurance in-force of $235 billion, and facilitated loans for 31,000 new home buyers, helping them buy homes 5.5 years earlier on average.
Despite recent setbacks, including the impending termination of supply contracts with CBA (44 percent of FY24 GWP) and ING (17 percent of FY24 GWP), Helia maintains steady revenues from existing in-force policies, which will be recognized over a 15-year timeline in line with AASB 17. While new business volume will dip, its existing book continues to provide a solid revenue base.
Dividends and Capital Management
Helia’s capital management strategy is one of its most compelling investment angles. In FY24, it returned a massive $345 million to shareholders through:
- Fully franked dividends of 84 cents per share (ordinary and special)
- $113 million in on-market share buybacks, reducing the share base by 9.4 percent
Even more impressive, this capital return came with a PCA coverage ratio of 2.10 times, well above APRA’s minimum and the company’s target range of 1.4 to 1.6 times. Management has indicated plans to continue special dividends and share buybacks, especially as the capital released from runoff books increases organically due to contract exits.
Financial Highlights
- Statutory NPAT for FY24 stood at $232 million, with underlying NPAT of $221 million
- Net investment revenue reached $141 million, supported by higher returns on reinvested bonds and equities
- Total shareholder return (TSR) was 18 percent, outperforming the ASX200 by over 6 percent
- Maintains net zero emissions (Scope 1 and 2) and is refining Scope 3 monitoring
Final Take
While the loss of two major contracts could be a red flag for some, Helia’s prudent capital allocation, low delinquency rates, and a large, seasoned in-force portfolio soften the blow. For dividend-focused investors, Helia offers a compelling balance of yield, capital return, and moderate growth, all underpinned by a conservative capital framework.
Spark New Zealand Limited (ASX/NZX: SPK)
Spark New Zealand Limited is the country's largest telecom and digital services provider, offering mobile, broadband, cloud, and enterprise solutions to millions of New Zealanders and businesses.
While economic headwinds continue to buffet the corporate landscape, Spark New Zealand is holding its ground as a dependable dividend payer. Despite a sharp downturn in profitability and recessionary challenges, the company has reaffirmed its FY25 dividend guidance and is leaning into strategic cost control and asset monetisation to maintain shareholder returns.
Strategic Reset Amid Recession
In the first half of FY25, Spark’s core performance was notably affected by ongoing macroeconomic weakness. Revenue declined 1.9% to NZD 1,939 million and reported EBITDAI fell 20.9% to NZD 419 million. Net profit plunged to NZD 35 million, a steep 77.7% drop, reflecting higher transformation costs, mobile market pressures, and softness in enterprise and government spending.
Yet amid these challenges, Spark has taken decisive action: a cost transformation program (SPK-26) is underway, targeting NZD 80–100 million in FY25 cost reductions and up to NZD 140 million in annualised benefits by FY27. Spark is also streamlining its portfolio through asset sales, including its remaining 17% stake in Connexa for expected proceeds of NZD 310 million.
Reliable Dividend Strategy
Despite shrinking earnings, Spark declared an interim dividend of 12.5 cents per share (75% imputed), in line with full-year guidance of 25 cents per share. This payout is particularly notable given the company’s ongoing transformation and earnings volatility.
Dividend sustainability is further reinforced by:
- A Dividend Reinvestment Plan (DRP) offering shares at a 2% discount, giving investors optional reinvestment at attractive pricing
- The use of retained earnings to fund distributions, with over NZD 230 million allocated to shareholders this half
- A consistent supplementary dividend of 1.65 cents per share to non-resident investors, ensuring tax efficiency
Financial and Operational Snapshot
- Adjusted EBITDAI (excluding NZD 29 million in transformation costs): NZD 448 million
- Net tangible assets per share: NZD 0.32 as of December 31, 2024
- Capital expenditure guidance remains intact at NZD 415-435 million
- Growth in data centre revenue (+13.6%) and IoT connections (up 25%) offer long-term upside
- Net debt remains manageable at NZD 1.8 billion with sustainability-linked loan facilities
Final Take
Spark may not be delivering growth fireworks at present, but its dividend discipline, strong market position in mobile and broadband, and long-term digital infrastructure bets (data centres, cloud partnerships) offer a resilient yield play in a defensive sector.
For income investors, Spark remains areliable dividend-paying telecom, using strategic pivots and operational reshaping to maintain shareholder value even during economic turbulence.
(Source: Company Announcements)
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