Although dividend paying companies offer a lucrative source of passive income, the dividend growth stocks provide a hedge against inflation.
Brickworks Limited (ASX: BKW)
Brickworks Limited (ASX: BKW) delivered a mixed financial performance in FY2024, underpinned by solid progress across its strategic initiatives despite challenging market conditions. The company achieved key milestones, including the substantial completion of its Oakdale West Estate, now regarded as one of the premier industrial property precincts in Australia. Additionally, Brickworks secured development approval for Oakdale East Stage 2 and commenced construction of a flagship facility for Amazon. These developments highlight the strength of Brickworks' property portfolio, which remains a key contributor to long-term shareholder value. In its Building Products segment, Brickworks reported an uplift in underlying EBITDA in both Australia and North America. In Australia, cost reduction and restructuring initiatives have streamlined operations, enhancing efficiency. Meanwhile, the North American division completed a five-year plant rationalisation program, reducing the number of operational plants from 16 to 8. This strategic consolidation, alongside bolt-on acquisitions, positions the company for improved profitability in the region as market conditions recover.
Despite these operational achievements, Brickworks recorded a statutory loss of $119 million in FY2024, driven primarily by non-cash write-downs. The property division faced a devaluation, while the Building Products segment recorded impairments in Austral Masonry and its North American operations due to deteriorating building activity in key markets. However, the company's diversified business model, which includes industrial property, investments, and building products, has demonstrated resilience, providing stability during cyclical downturns. The company also benefited from a $263 million increase in the value of its listed investments, including stakes in Washington H. Soul Pattinson and FBR Limited. This helped to offset some of the challenges faced by its Building Products division and provided a further cushion against market volatility.
Brickworks is one of those growth stocks whose commitment to shareholder returns remained strong, with the Directors declaring a fully franked final dividend of 43 cents per share, bringing the total dividend for FY2024 to 67 cents, up 3% on the prior year dividend yield. The company has a remarkable track record of dividend stability, having not reduced its dividend in 48 years—a testament to its robust financial position and prudent capital management. Net debt increased marginally by $29 million to $682 million, reflecting ongoing investment in growth initiatives, with gearing remaining at a conservative 20%. Over the past five years, Brickworks has undergone a significant transformation, particularly with its expansion into North America and several major capital projects, contributing to a substantial asset base of $5.8 billion. Looking ahead, Brickworks remains confident in the long-term prospects of its diversified portfolio, which continues to offer shareholders stability, growth potential, and consistent earnings. With investments in cost optimisation, new projects, and capital management, the company is well-positioned to navigate near-term challenges and deliver sustained shareholder value.
Medibank Private Limited (ASX: MPL)
Medibank Private Limited has evolved from a health insurer into a comprehensive health company, serving approximately 4.2 million customers and conducting more than 4 million health interactions within one year. Its performance is strong due to customer satisfaction, strategic investment in health transitions, and disciplined growth. Medibank is always targeting the vision of bettering the health and wellbeing of all Australians through refining its strategies with the demand of its customer base.
In the past year, Medibank saw growth alongside the industry while maintaining a careful approach to competition and long-term business management. This strategy resulted in a 6.3% increase in Health Insurance operating profit and a remarkable 36.7% rise in profit from the Medibank Health segment, largely due to increased investment in Myhealth. For the 2024 financial year, Medibank declared a total dividend of 16.6 cents per share, fully franked, which amounts to $457.2 million. The overall payout ratio of 80.1% of underlying net profit after tax aligns with Medibank’s target range, highlighting its strong capital position and commitment to returning value to shareholders.
Recognizing the important role played by private hospitals in the country's healthcare system, Medibank has taken myriad steps to assist its hospital partners through this health transition. Over the past two years, the company has provided approximately $63 million in one-off financial support to hospitals, alongside higher indexation in hospital agreements and additional incentives. This initiative underscores Medibank's dedication to ensuring a strong private hospital sector, which ultimately benefits its customers.
Medibank anticipates moderating industry growth in FY25 but aims to maintain disciplined customer growth aligned with market trends. The company expects a growth of around 2.7% in claims per policy unit and is targeting $10 million in productivity savings. Medibank plans for average organic profit growth of at least 15% per year between FY24 and FY26 and aims to invest between $150 million to $250 million in mergers and acquisitions during the same period. The upcoming finalization of a customer give-back program in FY25 also reflects the company's commitment to returning value to its customers.
(Source: Company’s Report)
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