Buy Hold Sell: 6 stocks consistently growing their dividends

James Marlay: Hi there, folks. It's James Marlay here and welcome to Buy Hold Sell, brought to you by Livewire Markets. 

Today we're talking about dividends - who doesn't love them? - and we're going to the top of the pops to talk about dividend royalty on the ASX. These are the stocks that grow and never cut their dividends. 

Joining me on the show today, I have the two doctors: Dr Michael O'Neill from IML and Dr Peter Gardner from Plato. Gents, great to have you in the studio, and thanks for coming in.

AUB Group (ASX: AUB) 

James Marlay: Dividend aristocrats - they're the stocks that have done 25 years of consecutive dividend increases. On the ASX, we have just one. You probably know it's Soul Patts, but there's a few that are hot on its heels. 

AUB Group - that's our first stock. 20 consecutive dividend increases. Michael, is it a buy, hold, or a sell?

Michael O'Neill: (HOLD) It's a very high-quality insurance distribution business, and there's a lot to like about it. And yet, it has compounded its earnings and dividends some 10 or 11% per annum since 2005. So, there's a lot to like about the industry. 

We've owned Steadfast as well since IPO in 2013, and that's under takeover today for good reason. The industry is about providing advice on complex products, triaging claims, and because of that, they get 90% plus retention of clients. 

Where AUB brokers fall short: they need to catch up a bit on investment in technology and data. And 31% of their business is in international - so the Tysers business, the wholesale, Lloyd's of London. We see that as a little bit more cyclical, a little bit more competitive, and a bit of talent risk.

James Marlay: Okay. If you'd held AUB Group over the years, you would've done really well. Is it a buy, hold, or a sell for you, Pete?

Peter Gardner: (HOLD) We have liked it quite a bit over the years. At the moment, it's a hold for us - so, similar to what Michael's saying. 

Another big risk that we just see in the AUB business at the moment is around AI. They're obviously an insurance broker, so they sell insurance. And so the question is: could other people, other companies in particular, generate AI products which do the searching for them, create a kind of bot that goes out there and does what Michael was talking about them doing? So that's the other risk that it has. So it is looking decent value. There's a chance of a takeover approach for it as well, but there is risk there as well.

CAR Group (ASX: CAR) 

James Marlay: Next stock is CAR Group. 16 consecutive years of dividend growth. The old rivers of gold - it's been showering investors in dividends, albeit the yield's not that high. Buy, hold, or a sell?

Peter Gardner: (SELL) It's a sell for us, but its yield's actually not too bad at the moment. It's 4% gross yield when you include franking credits. So those increases have gone through, and the price has come back recently. And so it's actually not looking too bad value at the moment, but we do think it's a little bit expensive at the moment. 

There is AI risk around CAR Group as well, particularly with other major technology players that could look to replicate what CAR Group do, too. 

Overall, it's a decent company, but we wait for a lower entry point, and also for the risks around the kind of cycle environment that we're in at the moment in terms of property prices going down. Consumers are spending less on big-ticket items like cars, and so that's a risk for it as well.

James Marlay: Pete said AI, bit of a tough environment for the consumer, but it's got that good dividend streak. Buy, hold, or sell on CAR Group?

Michael O'Neill: (BUY) They do have the number one position in the markets. It's not often you can buy a business growing double-digit on towards 20 times PE. They've got a great network effect and share in the dealer market. They are an essential part of dealers moving inventory on. And on the data side, we do think they have a genuine advantage in data in modelling propensity across their customers, price value, different models. 

I think large language models are going to find it hard to replicate what they have. So, it's a little bit more balanced in terms of AI risk in our minds, and the AI risk has been heavily played in the share price. 

Plus, we think the international opportunities are quite attractive, particularly Brazil. Their competitor is quite weak, there's low digital penetration, and they're also winning in the dealer market there.

ResMed (ASX: RMD) 

James Marlay: And now our next stock is ResMed - market darling. And if you were to screen it for the dividend streak, it probably wouldn't show up. That's because it pays in foreign currency, and those exchanges move it around the Aussie dollar, but it does have a strong dividend streak. Buy, hold, or sell on ResMed?

Michael O'Neill: (BUY) We did buy it in the mid-teens, but we think it's still good value today. And the reason is they do have that number one position in sleep apnoea devices and masks, and the consumables that go with that underpin a steady, growing free cash flow. 

The market's growing single-digit, mid-single digit, and they're actually winning share in the market. They do have a net cash balance sheet, which is very attractive. Now, there's been a bear case around GLP-1 drugs, weight loss, meaning that their addressable market is shrinking—no pun intended—but the GLP-1 users actually in their data show up as more likely to sign up for a CPAP device and more likely to replace their mask on time. So, maybe they're just more health-conscious. 

Philips will be re-entering the market, which will add to competition, but we think that's more of an issue for the number two player, which is React Health. 

James Marlay: The theme of the GLP-1s - a skinny yield on ResMed. Buy, hold, or a sell for you?

Peter Gardner: (HOLD) It's a hold for us. It's definitely a skinny yield, as you point out, and we think, given that, it's very unlikely to cut its dividends going forward. 

We just see the risk around GLP-1 drugs as pretty significant. Those drugs are improving over time; there's lots of updates that are coming through. There's potential pills coming on which will make it easier to take those kind of drugs. And so, whilst we've yet, as Michael pointed out, to see much evidence that people are taking less sleep apnoea devices or using less sleep apnoea devices because they're taking the GLP-1 drugs, the risk is definitely there going forward. 

Charter Hall Group (ASX: CHC)

James Marlay: Our next stock is Charter Hall: $76 billion portfolio of property across office, retail, industrial. In that REIT space, tend to be a bit sensitive to rates. Buy, hold, or a sell?

Peter Gardner: (BUY) It's a buy for us. We're actually kind of a sell on the overall property industry given the challenges that are happening at the moment, but we think Charter Hall is the best of the bunch. 

If you're going to own a property stock, then Charter Hall's a pretty good one to own. Its price has come back quite a lot recently with yields going up, as you point out, so it's looking decent value to us. It's not often that you get to buy it on a kind of 15 times PE. It's got a decent yield - around 3.6% gross yield with some franking there. Overall we think it's good despite being in a poor cycle.

James Marlay: Charter Hall's got a funds management business in there as well - a 15-year unbroken dividend streak. Buy, hold, or a sell?

Michael O'Neill: (HOLD) It's a hold for us. So, do appreciate the quality of the management; their execution over time has been great. And yes, the share price has fallen in sympathy with higher bond yields. 

That being said, versus a traditional asset-heavy REIT, they have more earnings sensitivity to property valuations, interest rates, and also fund flows. So, we're looking at the competitive dynamics with GPT and Mirvac, not just on price, but on investor-friendly policies. And right now, at this point in the cycle with bond yields going up, we prefer the more pure-play, asset-focused REITs because they have the lower earnings volatility.

Guest picks

James Marlay: We've tried to find some dividend royalty in there. We're not getting consensus across the dividend growers. So, going to get our guests to pitch a stock that they think is top of the pops when it comes to dividends. Mike, what's your pick for us today?

Dalrymple Bay Infrastructure (ASX: DBI) 

Michael O'Neill: Dalrymple Bay Infrastructure, DBI. They have at least till 2051 on the Dalrymple Bay coal terminal with a right to extend to 2100. That's a long time. It's a long asset life, and it's inflation-linked cash flows. They also don't take any volume risks, so it's 100% take-or-pay. They don't take any operating risk; the maintenance costs are passed through to the customers. In fact, they don't actually operate the terminal. And finally, they don't take any bad debt risks, so any defaults amongst their 11 high-quality customers are socialised. 

To us, that's a really, really steady and inflation-protected distribution, and they're guiding to 3% to 7% growth per annum in the foreseeable future, part of which is underpinned by their non-expansionary capex programme. 

There is one other thing, a bit longer dated: in 2031, they might have an opportunity to reprice because if you compare their terminal charges to local competitors, they're significantly lower. 

James Marlay: You've been banging the table on that one for a while. DBI it is. If that's Mike's king of the pack, have you got an ace for us on the dividend front, Pete?

Dicker Data (ASX: DDR) 

Peter Gardner: Our one is Dicker Data. It's a technology distribution company, so it's a bit surprising that you'd see it as a kind of dividend play out there, but it's actually got a decent yield. It's a 4.3% yield that's paid quarterly. 

And what does Dicker Data do? It actually distributes technology. So it's got a lot of clients that are either government or businesses, and it acquires the hardware, the software for them, helps them implement them. So it's fairly low risk in terms of technology going forward, because I think those companies and the government are going to need that kind of advice going forward. 

Then it also has some growth options as well. It's recently acquired a company called Exertis Security, which deals in Southeast Asia. So it is potential to put its model into Southeast Asia, and also to increase its weight in cybersecurity, which is a growth area as well. As we know with AI, cybersecurity is a big deal at the moment. So it's potential for growth with a good existing yield as well.

James Marlay: Well, our two doctors have gone with the Ds - Dalrymple Bay and Dicker Data - for their top dividend royalty picks. Remember, check out our next show; we're going to go for some higher yields and look at some of the big sectors, banking and resources, with their results coming up. Make sure you subscribe to our YouTube channel. I hope you enjoyed that episode of Buy Hold Sell.

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The ASX has just one dividend aristocrat (plus a handful of contenders)

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