MARKET CLOSE: NZX 50 rises to record again; Meridian paces yield stocks higher
New Zealand shares rose, pushing the NZX 50 Index to a record, as low interest rates spurred investors to seek out companies paying reliable dividends such as Meridian Energy. Fisher & Paykel Healthcare gained after the kiwi dollar touched a three-year low.
The NZX 50 index rose 39.082 points, or 0.7 percent, to 5737.738, bringing its gains this year to 2.3 percent. Within the index 22 stocks rose, 19 fell and nine were unchanged. Turnover was $98.7 million.
New Zealand utility and property stocks offering high dividends have been attractive to global investors seeking a real return in a low interest rate environment, which has helped propel the local market higher in recent months. Spark, which has a dividend yield of 7.1 percent, rose 3.6 percent to $3.345, leading the benchmark index higher.
Meridian rose 1.3 percent to $1.905, leading gains among power companies. MightyRiverPower gained 1.7 percent to $3.50 and Genesis Energy rose 0.5 percent to $2.24. In the property sector, which also pays steady and reliable dividends, Precinct Properties New Zealand rose 1.6 percent to $1.2 and Kiwi Income Property Group rose 0.8 percent to $1.34.
"It's still a hunger for yield," said Rickey Ward, NZ equity manager at JBWere. "The alternatives such as deposits are at low levels. People can't live on those sorts of returns. Our market is dominated by income-orientated stocks - utilities and property companies, and there is certainty around their dividends. That's the justification. Of course it all unravels if companies don't deliver on earnings growth."
As a result of the demand for yield, and optimism dividends could rise, equity investors are paying higher multiples than they've had to historically, he said.
F&P Healthcare rose 2.7 percent to $6.16. The company's largest source of revenue is in US dollars and it gets a benefit when it repatriates sales back into a weaker kiwi dollar. The local currency touched 73.94 cents, its lowest level since November 2011.
New Zealand Oil & Gas rose 2.4 percent to 63 cents after the company said preliminary results indicate reserves at the Kupe field may be greater than expected.
Spark New Zealand rose 1.4 percent to $3.39 after the company said head of home, mobile and business Chris Quin, a 20-year veteran of the company and one-time contender for the top job will leave at the end of June.