In the final weeks of Australia’s election cycle, both consumer and business sentiment showed a market shift toward optimism, as the center-right Liberal-National Coalition was widely anticipated to prevail at the polls. That result came to pass on Saturday, so now it’s time to ponder what effect the new ruling party will have on the country’s slowing economy, as well as whether the electorate’s upbeat outlook will prove ephemeral or translate into an increase in consumer spending and business investment.

On the political front, Tony Abbott’s Liberal-Nationals have a clear majority in the House of Representatives, but they still have to cobble together a majority in the Senate, where the Coalition has a plurality of seats, with a number of minor parties holding the balance of power. Fortunately for Abbott, there appear to be at least a half-dozen minor-party senators whose politics appear aligned with the Coalition.

Abbott has pledged to scrap both the carbon tax and the Minerals Resource Rent Tax (MRRT), both of which should be a boon to the resource sector, as well as any other industries whose operations emit carbon. Beyond that, firms assume the Coalition will create a more predictable business environment, with fewer tax and regulatory burdens. Of course, even if the Liberal-Nationals cobble together a majority in the Senate, it could still be some months before the carbon tax and MRRT are rolled back, given the slow grind of politics in a representative democracy.

In the meantime, businesses, despite their newfound optimism, must still contend with lackluster operating conditions, though there have been a couple of noteworthy improvements in recent months. For one, although the Australian dollar has rallied from its low of USD0.89 in late August, recently trading near USD0.925, it’s still down a significant 12.7 percent from its year-to-date high of USD1.06 in early January.

Until its descent began in earnest in early May, the Aussie had enjoyed unusual strength relative to other global currencies, thanks in part to perceptions that it’s backed by the hard assets of Australia’s resource economy. While that strength helped enhance returns of foreign investors seeking to diversify away from other developed-world currencies of more challenged economies, it was a major headwind for Australia’s firms when competing in the global economy.

In fact, one of the major goals of the Reserve Bank of Australia’s (RBA) monetary policy has been to remove support for the Aussie. Although the RBA has been on a rate-cutting cycle since late 2011, incrementally lowering its cash rate until it reached an all-time low of 2.5 percent in August, it was the US Federal Reserve’s more hawkish tone toward monetary policy that was finally the Aussie’s undoing. According to Bloomberg’s survey of economists, the consensus forecast is for the Aussie to bottom at USD0.87 in 2015-16, before rising again thereafter.

Meanwhile, muted inflation and a worrisome trend in unemployment will likely compel the RBA to maintain its easing bias at least through the middle of next year, another plus for both businesses and consumers.

The Coalition’s approach to foreign policy could also help boost trade in the Asia-Pacific region. China is already Australia’s largest trading partner, but stronger links could be forged with other regional economies via bi-lateral relations, including finalized trade agreements with Japan and South Korea, among others.

This background has created a subtle change in Australian mining firms’ willingness to deploy capital. Analysts with Ernst & Young recently noted that while mining executives remain careful about committing capital to new projects, they’re at least contemplating doing so now. That’s in contrast to just a few months ago when the more prudent options seemed to be either to retain capital or return it to shareholders.

 While consumers are also upbeat, like the business community they expressed optimism in general, but were more circumspect about their personal situations. In contrast to the US, Australia’s unemployment rate stands at an enviable 5.8 percent, though it’s risen a half-point since November and is now just one-tenth of a percentage point below the country’s high following the global downturn. An uncertain job market could continue to keep consumers sidelined.

This caution is evidenced by consumers’ continued restraint on spending. In July, for instance, retail sales climbed just 0.1 percent month over month, falling short of the consensus forecast by a substantial three-tenths of a percentage point. Over the past five years, retail sales have averaged growth of 0.3 percent per month, but that’s slowed to 0.2 percent over the trailing year. Over the five years preceding the Global Financial Crisis, by contrast, retail spending averaged growth of 0.4 percent per month.

But if there’s one area that clearly benefits from a historically low interest rate environment, it’s the housing market. And now that the RBA’s low rates are flowing through to mortgages, sentiment shows an increase in the number of consumers who believe that now is a good time to buy a house.

In July, according to the Australian Bureau of Statistics, dwelling approvals for private-sector houses increased for the eighth consecutive month, up 3.9 percent in seasonally adjusted terms. At the same time, overall dwelling approvals jumped 10.8 percent, for the highest gain since April. While the trailing-year average shows monthly gains in dwelling approvals of just 1.4 percent, that’s still more than double the five-year average of 0.6 percent. So the housing sector is clearly gaining momentum, even if not every month shows dramatic gains in dwelling approvals.

In all likelihood, once Australia has moved past the protracted drama of this unusually long election cycle as well as the subsequent honeymoon, rosy sentiment will revert to more normal levels. But assuming the ascendant Liberal-Nationals are able to rescind both the carbon tax and the MRRT, as well as rationalize the regulatory environment, then that will help set the stage for an eventual rebound in the resource sector, as well as the broad economy.

Dividend Watch List

AE Portfolio Conservative Holding SMS Management & Technology Ltd (ASX: SMX, OTC: SMSUF, ADR: SMSUY), which wasn’t on the Watch List and which sported a perfect “6” under the AE Safety Rating System, declared a final dividend of AUD0.12 per share, down 29.4 percent from AUD0.17 a year ago.

That brought the fiscal 2013 full-year dividend to AUD0.255, 16.4 percent lower than the AUD0.305 paid for fiscal 2012.

Management reported net profit after tax (NPAT) of AUD21.1 million for fiscal 2013, 31 percent below fiscal 2012 largely due to a decline in client demand across a number of sectors.

CEO Tom Stianos noted that “SMS retains strong client relations and is well placed to lift financial performance when business sentiment improves.”

Mr. Stianos attributed the weak result to otherwise financially strong clients’ “uncertainty about macroeconomic factors” causing the deferral of projects and the reduction of information technology spending.

Client-specific issues management noted in commentary accompanying the announcement of fiscal 2013 first-half results evidently spread into a more general decline in demand for services during the second half of the year. Revenue from services was down 17 percent to AUD278.5 million.

Management reduced overhead costs substantially but not enough to overcome subdued trading conditions.

Management expects that the first half of fiscal 2014 “will remain challenging,” though Mr. Stianos noted that SMS is “well leveraged to an uplift in client demand in the second half” of the year. SMS maintains a strong balance sheet, with zero debt and AUD37 million in cash as of June 30, 2013.

Based on management’s guidance and the inability of the underlying business to support a consistent dividend during a fallow period, we’re moving SMS Management & Technology, to the Aggressive Holdings. SMS remains a buy under USD6.50.

Fiscal 2013 reporting season has wrapped up Down Under, with a slew of dividend reductions, concentrated in the Basic Materials group.

Ausdrill Ltd (ASX: ASL, OTC: AUSDF) declared a dividend of AUD0.055, down from AUD0.08 a year ago.

The company reported a 6.6 percent increase in fiscal 2013 sales revenue to AUD1.129 billion, though NPAT declined by 19.4 percent to AUD90.4 million and earnings per share were down 20.5 percent to AUD0.2963.

Normalized NPAT was AUD101.1 million, implying an equal first half/second half earnings split. EBITDA was AUD288.5 million, while EBITDA margin was 22.6 percent, a slight improvement over the first half of fiscal 2013.

Operating cash flow was strong at AUD187.3 million, on an improvement in working capital versus the first half, when operating cash flow was AUD53 million.

Capital expenditure for the full year was AUD187 million but declined significantly during the second half to AUD62 million. Management forecast fiscal 2014 CAPEX of AUD50 million to AUD60 million, as the impact of the steep slowdown in the mining sector continues.

Net debt declined to AUD458 million from AUD481.2 million as of Dec. 31, 2012, while net debt as a percentage of net debt plus equity–Ausdrill’s definition of gearing–was 36 percent.

Second-half free cash flow was AUD72.5 million, providing a foundation for Ausdrill to meet its plant of paying down AUD80 million in fiscal 2014, AUD60 million in fiscal 2015, AUD90 million in fiscal 2016 and then AUD320 million in fiscal 2020. Ausdrill remains a buy under USD2.

Three companies posted results that earned them removal from the Watch List.

Fortescue Metals Group Ltd (ASX: FMG, OTC: FSUMF, ADR: FSUGY) has earned its way off the List by declaring a final dividend of AUD0.10 per share, up from AUD0.04 a year ago as management likely tried to compensate investors for the omission of the fiscal 2013 interim dividend.

Fiscal 2013 revenue was up 21 percent to USD8.12 billion, driving a 12 percent increase in NPAT to USD1.746 billion. Iron ore shipped was up 41 percent to 80.9 million metric tons, as commodity prices stabilized and costs declined 9 percent. Fortescue is now a buy under USD4.50.

Iluka Resources Ltd (ASX: ILU, OTC: ILKAF, ADR: ILKAY) declared a 2013 interim dividend of AUD0.05 per share, down from AUD0.25 a year ago.

First-half profit was down to AUD34.3 million from AUD274.4 million, as lower received prices offset 4.9 percent higher sales volumes and a 35.8 percent reduction in cash costs. Solid cash flow and a strong balance sheet support continuing the current dividend profile for a company with significant potential for expansion in China.

Now off the Watch List, Iluka Resources is a buy under USD10.

Independence Group NL’s (ASX: IGO, OTC: IPGDF) final dividend was flat at AUD0.01 per share; the fiscal 2013 interim was AUD0.01 compared to AUD0.02 a year ago.

Fiscal 2013 net profit was AUD18.9 million, reversing a AUD285.3 million net loss for fiscal 2012. Underlying EBITDA surged by 69 percent to AUD56.8 million, as revenue ticked up 4.3 percent to AUD225.9 million.

A solid set of full-year numbers after an equally solid set of interim numbers, coupled with dividend consistency at a low rate, is sufficient to earn Independence an exit from the List. Independence Group is a buy under USD3.50.

Basically the entire Basic Materials section of the How They Rate coverage universe can now be considered on the List, in one sense because all those companies are exposed to volatile resource prices, in another, more concrete way because most announced lower dividends this period than they did for the last one, one of the criteria that will get you a place on the List.

The Watch List is rather lengthy, a reflection of longstanding dividend practice for Corporate Australia, which as a general rule is not bound by strict dividend rates but rather by payout ratio ranges when it comes to “capital management” policy.

We have, however, removed companies that have omitted dividends for more than two consecutive cycles; for these companies dividend policy can be considered “discontinued.”

Australian companies customarily maintain policies of paying out a specified percentage based on particular earnings metrics, whether that metric is statutory net profit after tax (NPAT), underlying NPAT or operating cash flow.

Practically speaking, dividend rates will often vary more than they do for Canadian or US companies, which are almost universally pledged to maintaining dividend rates, often at the cost of tapping balance sheets in the absence of sufficient cash flow to cover obligations to shareholders.

This latter is fine in the short term, and it can be manageable in the longer term as well. But Australian firms are traditionally more debt-averse than their North American counterparts.

It’s important to note, too, that the CE Dividend Watch List is based on the monthly distribution scheme established during the income trust era, which, to the benefit of investors everywhere, persists even after the forced conversion to traditional corporations for many of these stocks.

Australia’s twice-yearly rhythm varies as well from the quarterly dividend arrangement to which most US companies adhere.

With recent dividend reductions and/or changes to guidance or policies that suggest non-regular payment the following companies have declared their worthiness for inclusion on the Dividend Watch List.

Basic Materials

Aditya Birla Minerals Ltd (ASX: ABY, OTC: ABWAF) reported a 1 percent rise in fiscal 2013 revenue to AUD502.3 million, but management reported a net loss of AUD8.3 million and didn’t declare a final dividend.

Company policy is “to seek to maximise cash returns to Shareholders whilst having regard to ensuring a sound financial structure for the Company and providing for value accretive development and exploration activities and targeted growth opportunities.”

Because there’s no clarity on the payment interval this stock will probably be an emeritus member of the Dividend Watch List.

Without a consistent dividend payment to compensate speculation of a return to more normal economic growth and a corresponding rebound in copper prices, Aditya Birla is a hold.

Arrium Ltd (ASX: ARI, OTC: ARRMF, ADR: OSTLY) declared a final dividend of AUD0.03, in line with the prior corresponding period, as it reported a fiscal 2013 statutory net loss of AUD695 million due to AUD961 million in impairment and restructuring charges.

Underlying net profit was in line with guidance at AUD168 million, and management offered upbeat fiscal 2014 guidance. Hold.

Grange Resources Ltd (ASX: GRR, OTC: GRRLF) held its 2013 interim dividend steady at AUD0.01 per share. First-half iron ore product sales declined by 37.7 percent, however, and average realized prices were off by 11.4 percent.

Revenue was down 44.8 percent to AUD106.9 million, as NPAT slid 95.4 percent to AUD2.5 million. Hold.

Kingsgate Consolidated Ltd (ASX: KCN, OTC: KSKGF) omitted its final dividend after cutting its interim dividend by 50 percent to AUD0.05 per share.

Management reported a fiscal 2013 net loss after tax of AUD324 million due to AUD336 million of impairments and writedowns. Kingsgate’s realized gold price declined 4.5 percent to USD1,588 per ounce, as sales volume was off 4 percent to 195,948 ounces. Hold.

Medusa Mining Ltd (ASX: MML, OTC: MDSMF) omitted its final dividend, although fiscal 2013 revenue was up 28 percent to USD100.7 million and NPAT was up 2 percent to USD50.2 million. Medusa received USD1,610 per ounce for its sales volume of 77,488 ounces of gold versus USD1,658 per and 55,446 ounces sold in fiscal 2012.

Medusa didn’t pay an interim dividend despite the fact that fiscal 2013 first-half revenue was up 28 percent, EBITDA was up 24 percent and NPAT grew by 19 percent.

Management is clearly shepherding cash to its key Co-o gold mine development. Medusa Mining is a buy under USD2.

Mount Gibson Iron Ltd (ASX: MGX, OTC: MTGRF) maintained its fiscal 2013 final dividend at AUD0.02 per share.

Fiscal 2013 sales revenue were up 32 percent to AUD852.9 million, though net income dipped to AUD157.3 million from AUD162 million a year ago. Metric tons sold were up 69.2 percent. Mount Gibson, which had AUD376 million in cash as of June 30, 2013, is a buy under USD0.50.

Oz Minerals Ltd (ASX: OZL, OTC: OZMLF, ADR: OZMLY) declared an interim dividend for fiscal 2013 of AUD0.10, in line with the prior corresponding period.

But that was small comfort in the light of an underlying loss of AUD36.1 million for the first half. Net loss after tax was AUD268 million, driven by writedowns of AUD231.9 million at Prominent Hill.

Oz Minerals’ cash pile has dwindled to about AUD550 million from nearly AUD1 billion, but management was relatively upbeat, noting that the worst of the metals slump is over. Buy under USD4.50.

Panoramic Resources Ltd (ASX: PAN, OTC: PANRF), which resumed its dividend with an interim declaration of AUD0.01 per share after not paying a final dividend for fiscal 2012, omitted its final dividend for fiscal 2013.

Fiscal 2013 revenue was off by 22 percent to AUD181.8 million on weaker Australian dollar nickel prices and lower nickel deliveries, though cost of sales declined 11 percent.

The net loss after tax widened to AUD31.7 million from AUD18.2 million. Buy under USD0.35.

Sedgman Ltd (ASX: SDM, OTC: SGTDF) declared a final dividend of AUD0.02 per share, down from AUD0.065 a year ago. Revenue declined 33.1 percent to AUD435.5 million, as NPAT declined 75.1 percent to AUD9.4 million. Hold.

TFS Corp (ASX: TFC, OTC: TFSCF) declared a final dividend of AUD0.03 after not paying shareholders since November 2011.

Fiscal 2013 NPAT surged by 115.4 percent to AUD55.7 million, and operating cash flow was AUD21.8 million versus an outflow of AUD60.5 million for fiscal 2012. The beginning of its first sandalwood harvest signals good things for shareholders ahead. Hold.

Western Areas NL (ASX: WSA, OTC: WNARF) omitted its final dividend after cutting its fiscal 2013 interim dividend by 60 percent compared to fiscal 2012.

Management reported a fiscal 2013 net loss after tax of AUD94.1 million, including impairment charges of AUD99.7 million, though cash flow from operations was AUD112.1 million despite weak nickel prices. Production and costs both beat guidance, but policy is to pay from NPAT, and there was none. Buy under USD3.60.

Whitehaven Coal Ltd (ASX: WHC, OTC: WHITF) didn’t declare a final dividend after omitting its interim dividend.

Management reported a fiscal 2013 net loss after tax of AUD60.7 million, reversing a fiscal 2012 NPAT of AUD57.8 million due to “significantly” lower coal prices, care and maintenance of Sunnyside mine and writedowns at other projects. Net debt also surged. Buy under USD2.

Consumer Goods

GUD Holdings Ltd (ASX: GUD, OTC: GUDHF, ADR: GUDDY) management declared a final dividend of AUD0.26 per share, down from AUD0.35 a year ago. Management also declared a special dividend of AUD0.10 per share, finishing up the capital management strategy it announced along with the sale of the Breville unit in February 2012.

GUD had announced on June 20 that it expects full-year fiscal 2013 underlying profit to come in 20 percent below fiscal 2012.

Reported EBIT was in line with guidance, down 20 percent AUD56.4 million. Total group sales were down 2 percent to AUD596.5 million, as sales increased in all business segments with the exception of Consumer Products, where both Sunbeam and Oates reported lower sales in the period. GUD is a buy for speculators under USD6.50.

Ridley Corp (ASX: RIC, OTC: RIDYF) didn’t declare a final dividend after omitting its interim dividend for fiscal 2013. Management reported a net loss of AUD21.7 million for fiscal 2013. Hold.

Consumer Services

APN News & Media Holdings Ltd (ASX: APN, OTC: APNDF) didn’t declare an interim dividend for 2013 after omitting its final dividend for 2012, as it continues to focus on repairing its balance sheet.

Management reported a net profit of AUD12.8 million for the six months ended June 30, turning from a loss of AUD308.2 million a year ago. Revenue was up 5 percent to AUD426.6 million, helped by AUD31.9 million from asset sales.

The advertising market remains challenged, and debt remains a concern. Sell.

David Jones Ltd (ASX: DJS, ADR: DJNSY) noted in a sales and revenue update that fiscal 2013 third-quarter like-for-like sales declined 3.4 percent year over year, as total sales slipped 2.2 percent to AUD391.1 million from AUD399.8 million a year ago. Management attributed the shortfall to an unusually warm winter’s impact.

The company cut its final dividend for fiscal 2012 to AUD0.07 per share from AUD0.15 a year ago. Hold.

Harvey Norman Holdings Ltd (ASX: HVN, OTC: None) boosted its final dividend by 12.5 percent after reducing its interim payout by 10 percent. That left the full-year 2023 dividend flat at AUD0.09 per share.

Fiscal 2013 NPAT was off by 17.5 percent year over year to AUD142.2 million, though NPAT excluding property revaluation adjustments was down just 3.3 percent to AUD183.4 million. Management noted improved second-half trading conditions, as lower interest rates spur consumers, and was positive on fiscal 2014. Hold.

Myer Holdings Ltd (ASX: MYR, OTC: MYGSF) reported that fiscal 2013 total sales were up 0.8 percent to AUD3.145 billion, as like-for-like sales rose 0.4 percent.

Operating margin improved by 40 basis points to 41.7 percent, but management still reduced the final dividend to AUD0.08 per share from AUD0.09. Buy under USD2.50.

Seven West Media Ltd’s (ASX: SWM, OTC: WANHF) final dividend was flat at AUD0.06 per share.

Fiscal 2013 NPAT excluding items was flat too at AUD225 million on revenue of AUD1.867 billion, though management reported a statutory net loss of AUD70 million on magazine business impairments. Management noted strong TV advertising and forecast low single-digit growth for fiscal 2014. Buy under USD2.

Southern Cross Media Group Ltd (ASX: SXL, OTC: SOUTF) reduced its final dividend from AUD0.05 a year ago to AUD0.045, as it reported net profit after tax of AUD96 million, ahead of guidance of AUD90 million to AUD95 million.

With the final dividend the company’s full-year payout ratio came to 66 percent, in line with company policy. Hold.

Tabcorp Holdings Ltd (ASX: TAH, OTC: TABCF) declared a final dividend of AUD0.08, down from AUD0.11 a year ago. Fiscal 2012 revenue was up 2 percent to AUD2.003 billion, though net profit from continuing operations slipped 13.1 percent to AUD139.1 million.

Management’s focus for fiscal 2014 is on digital wagering and retaining market share amid a challenging market. Tabcorp is a buy under USD3.35.

Tatts Group Ltd (ASX: TTS, OTC: TTSLF) final dividend was down to AUD0.075 from AUD0.12 a year ago, though fiscal 2013 revenue from continuing operations was up 11 percent to AUD2.949 billion and continuing NPAT grew by 40.8 percent to AUD227.4 million. Lotteries revenue rose 13.6 percent and wagering was up 5.2 percent. Buy under USD3.

Financials

QBE Insurance Ltd (ASX: QBE, OTC: QBEIF) cut its 2013 interim dividend by 50 percent, though it was in line with management policy to pay 50 percent of cash profit.

First-half NPAT slide 37.2 percent to USD477 million. Cash profit was down 30.1 percent to USD590 million due to lower investment yields. Hold.

Industrials

Boart Longyear (ASX: BLY, OTC: BOARF, ADR: BLGPY) omitted its 2013 interim dividend. Management reported a net loss for the first half of the year of USD329.4 million versus net income of USD97.7 million a year ago.

Management cut its 2013 EBITDA guidance to the low end of a USD116 million-to-USD159 million range from the low end of a previous range of USD199 million-to-USD271 million. Hold.

Boral Ltd (ASX: BLD, OTC: BOALF) raised its final dividend by 71.4 percent after reducing its fiscal 2013 interim dividend to AUD0.05 per share from AUD0.075. That left the full-year dividend flat at AUD0.11 per share.

Revenue from continuing operations was up 10.5 percent to AUD5.209 billion, though management reported a net loss of AUD212.1 million on AUD328.1 million in impairments and writeoffs. Net income excluding items was up 3.2 percent to AUD104.4 million. Hold.

Bradken Ltd (ASX: BKN, OTC: BRKNF) paid a fiscal 2013 final dividend of AUD0.18 per share, down from the AUD0.215 final dividend it paid for fiscal 2012. Full-year dividends were down 7 percent to AUD0.38.

Fiscal 2013 sales revenue was down 10 percent to AUD1.31 billion, as operating earnings before interest, taxation, depreciation and amortization (EBITDA) slipped 2 percent but beat guidance at AUD214 million. Bradken is a buy under USD5.25.

Emeco Holdings (ASX: EHL, OTC: None) omitted its final dividend, as fiscal 2013 operating NPAT declined 50.5 percent to AUD35.2 million. Statutory NPAT was just AUD6 million on charges and impairments totaling AUD32.6 million.

Management used positive cash flow of AUD60 million to pay down debt. Hold.

GWA Group Ltd (ASX: GWA, OTC: GWAXF, ADR: GWAXY) reported a 6 percent decline in fiscal 2013 underlying like-for-like sales, as trading EBIT declined 13 percent to AUD66 million. Net margin was flat, as costs declined 10 percent.

Cash flow was sufficient to cover the API acquisition, debt reduction and the dividend. But the latter was down 33 percent on a full-year basis after management declared a final of AUD0.06 versus AUD0.085 a year ago. Buy under USD2.

UGL Ltd (ASX: UGL, OTC: UGLFF) declared a final dividend of AUD0.05 per share, down from AUD0.36 a year ago as the slowdown in mining activity, delays and execution issues with projects, particularly in power, and general economic malaise

Fiscal 2013 operating revenue declined by 12 percent to AUD4.2 billion, though underlying NPAT of AUD92.1 million was in line with guidance. Management also announced a plan to de-merge its property services business. UGL is a hold.

Oil & Gas

Caltex Australia Ltd’s (ASX: CTX, OTC: CTXAF) interim dividend was flat at AUD0.17, as

2013 first-half historic cost profit came in at AUD195 million, up from AUD167 million a year ago.

Replacement cost profit slipped to AUD171 million from AUD197 million. But both historic and replacement figures were at the upper end of guidance. Buy under USD16.50.

Technology

Redflex Holdings Ltd (ASX: RDF, OTC: RFLXF) cut its final dividend by 40 percent after reducing its interim dividend by 33 percent. Fiscal 2013 revenue was down 6.1 percent to AUD137.4 million, as EBITDA slid 27.5 percent to AUD35.4 million.

NPAT of AUD8.6 million missed management guidance of AUD10 million. Sell.

Telecommunications

Telecom Corp of New Zealand (ASX: NZT, OTC: NZTCF) reduced its final dividend by 27.3 percent, as fiscal 2013 revenue declined 8.5 percent to NZD4.189 billion. Adjusted EBITDA of NZD1.04 billion was in line with revised guidance, though NPAT ex-items was down 23.6 percent to NZD236 million. Sell.

The ADR List

We continue to track the How They Rate coverage universe and beyond for Australia-based companies that afford US investors the convenience of ADR investing, either on their initiative or via the effort of an interested financial institution.

Here again is our primer on Australian stocks, US OTC symbols and ADRs.

The great majority of the companies under How They Rate coverage have US symbols, many because they actively seek to raise capital here on their own accord. That means they comply, to varying degrees, with US Securities and Exchange Commission filing requirements for foreign companies and with US accounting principles. Others trade here because a sponsoring institution has effectively created a secondary market for the shares, without the underlying company’s active participation.

Shares traded on US OTC markets bearing a final “F” in their five-letter symbols are basically home-listed shares trading in a market created by and for US institutions. Individuals can buy and sell here, too. Prices basically reflect ASX prices and also reflect changes in the relationship between the US dollar and the Australian dollar. One “F” share represents one ASX-listed share. The dividend you receive in respect of an “F” share is the dividend paid in respect of the ASX-listed share, adjusted for currency effects.

An ADR is a certificate that represents stock of a foreign company. ADRs are listed on US stock exchanges or the OTC Bulletin Board or Pink Sheets. Those that trade OTC have five-letter symbols ending with the letter “Y.” All transactions, including dividend payments, are conducted in US dollars.

One ADR certificate may represent one or more shares of the foreign stock; it can also represent a fraction of a share. For example, one Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY) ADR, which trades under the symbol TLSYY, is worth five ordinary shares that trade on the Australian Securities Exchange under the symbol TLS. Australia & New Zealand Banking Group Ltd’s (ASX: ANZ, OTC: ANEWF, ADR: ANZBY) ADR, ANZBY, is worth one Australia-listed ANZ share.

Because many ADRs don’t have a one-to-one ratio between the depositary receipts and the shares of stock, financial ratios are often not included in stock listings. Data in Australian Edge Portfolio tables and How They Rate is derived based on Australian Securities Exchange symbols so is as complete as you’ll find anywhere.

Foreign companies themselves often “sponsor” the creation of their own ADRs. These are called “sponsored ADRs.” There are three levels of sponsorship.

A Level I sponsored ADR is created by a company because it wants to extend the market for its securities to the US. It does not, however, want to register with the Securities and Exchange Commission (SEC) or conform to generally accepted accounting principles (GAAP). Level I ADRs trade on the OTC Bulletin Board or Pink Sheets trading systems, usually but not exclusively by institutional investors. Australia & New Zealand Banking Group’s is a Level I ADR.

Level II and Level III sponsored ADRs must be registered with the SEC, and financial statements must be reconciled to generally accepted accounting principles. A Level II ADR requires partial compliance with GAAP, while a Level III ADR requires complete compliance. A Level III sponsorship is require if the ADR is a primary offering and is used to raise capital for the company. Only Level II and Level III sponsored ADRs can be listed on the New York Stock Exchange (NYSE), the American Stock Exchange or Nasdaq. Telstra Corp sponsors a Level III ADR in the US, meaning it’s actively seeking to raise capital here.

An unsponsored ADR is created by a US investment bank or brokerage that buys ordinary shares on the underlying company’s home market then deposits them in a local custodian bank. This depositary bank then issues shares that represent an interest in the stocks and handles most of the transactions with American investors, serving both as transfer agent and registrar for the ADR.

The shares of the foreign stock held in the custodian bank are called “American Depositary Shares,” although this term is sometimes used as a synonym for “American Depositary Receipts.” Unsponsored ADRs can’t be listed on the major American stock exchanges because they aren’t registered with the SEC and lack other necessary qualifications.

The price of an ADR is determined by supply and demand but will generally track the price of the underlying ordinary share. When dividends are paid, the custodian bank receives it and withholds any foreign taxes, exchanges it for US dollars and then sends it to the depositary bank, which then sends it to the investors.

The US depositary bank handles most of the interaction with US investors, including rights offerings, stock splits and stock dividends. Sponsored ADR investors may receive communications, including financial statements, directly from the company.

Here is a list of companies in the How They Rate coverage universe that have an ADR listing in the US, along with the number of ordinary ASX-listed shares the ADR represents.

Basic Materials          

• Alumina Ltd (ASX: AWC, NYSE: AWC)–One ADR is worth four ordinary shares.
• Aquarius Platinum Ltd (ASX: AQP, OTC: AQPBF, ADR: AQPTY)–One ADR is worth two ordinary shares.
• Arrium Ltd (ASX: ARI, OTC: ARRMF, ADR: OSTLY)–One ADR is worth 20 ordinary shares.
• BHP Billiton Ltd (ASX: BHP, NYSE: BHP)–One NYSE-listed ADR is worth two ordinary shares.
• BlueScope Steel Ltd (ASX: BSL, OTC: BLSFF, ADR: BLSFY)–One ADR is worth five ordinary shares.
• Fortescue Metals Group Ltd (ASX: FMG, OTC: FSUMF, ADR: FSUMY)–One ADR is worth five ordinary shares.
• Iluka Resources Ltd (ASX: ILU, OTC: ILKAF, ADR: ILKAY)–One ADR is worth five ordinary shares.
• Kingsgate Consolidated Ltd (ASX: KCN, OTC: KSKGF, ADR: KSKGY)–One ADR is worth one ordinary share.
• Mineral Resources Ltd (ASX: MIN, OTC: MALRF, ADR: MALRY)–One ADR is worth one ordinary share.
• Newcrest Mining Ltd (ASX: NCM, OTC: NCMGF, ADR: NCMGY)–One ADR is worth one ordinary share.
• Oz Minerals Ltd (ASX: OZL, OTC: OZMLF, ADR: OZMLY)–One ADR is worth 0.5 ordinary shares.
• Rio Tinto Ltd (ASX: RIO, NYSE: RIO)–One ADR is worth one ordinary share.

Consumer Goods

• Billabong International Ltd (ASX: BBG, OTC: BLLAF, ADR: BLLAY)–One ADR is worth two ordinary shares.
• Goodman Fielder Ltd (ASX: GFF, OTC: GDFLF, ADR: GDFLY)–One ADR is worth 10 ordinary shares.

Consumer Services

• Crown Ltd (ASX: CWN, OTC: CWLDF, ADR: CWLDY)–One ADR is worth two ordinary shares.
• David Jones Ltd (ASX: DJS, ADR: DJNSY)–One ADR is worth one ordinary share.
• Metcash Ltd (ASX: MTS, OTC: MCSHF, ADR: MHTLY)–One ADR is worth six ordinary shares.
• TABCORP Holdings Ltd (ASX: TAH, OTC: TABCF, ADR: TACBY)–One ADR is worth two ordinary shares.
• Wesfarmers Ltd (ASX: WES, OTC: WFAFF, ADR: WFAFY)–One ADR is worth 0.5 ordinary share.

Financials

• Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY)–One ADR is worth one ordinary share.
• Commonwealth Bank of Australia Ltd (ASX: CBA, OTC: CBAUF, ADR: CMWAY)–One ADR is worth one ordinary share.
• National Australia Bank Ltd (ASX: NAB, OTC: NAUBF, ADR: NABZY)–One ADR is worth one ordinary share.
• QBE Insurance Ltd (ASX: QBE, OTC: QBEIF, ADR: QBIEY)–One ADR is worth one ordinary share.
• Westfield Group Ltd (ASX: WDC, OTC: WEFIF, ADR: WFGPY)–One ADR is worth two ordinary shares.
• Westpac Banking Corp Ltd (ASX: WBC, NYSE: WBK)–One ADR is worth five ordinary shares.

Health Care

• Ansell Ltd (ASX: ANN, OTC: ANSLF, ADR: ANSLY)–One ADR is worth four ordinary shares.
• Cochlear Ltd (ASX: COH, OTC: CHEOF, ADR: CHEOY)–One ADR is worth 0.5 ordinary share.
• CSL Ltd (ASX: CSL, OTC: CMXHF, ADR: CMXHY)–One ADR is worth 0.5 ordinary share.
• Sonic Healthcare Ltd (ASX: SHL, OTC: SKHCF, ADR: SKHCY)–One ADR is worth one ordinary share.

Industrials

• Amcor Ltd (ASX: AMC, OTC: AMCRF, ADR: AMCRY)–One ADR is worth four ordinary shares.
• Boral Ltd (ASX: BLD, OTC: BOALF, ADR: BOALY)–One ADR is worth four ordinary shares.
• GWA Group Ltd (ASX: GWA, OTC: GWAXF, ADR: GWAXY)–One ADR is worth four ordinary shares.
• Toll Holdings Ltd (ASX: TOL, OTC: THKUF, ADR: THKUY)–One ADR is worth two ordinary shares.

Oil & Gas

• Beach Energy Ltd (ASX: BPT, OTC: BEPTF, ADR: BCHEY)–One ADR is worth 20 ordinary shares.
• Boart Longyear Ltd (ASX: BLY, OTC: BOARF, ADR: BLGPY)–One ADR is worth two ordinary shares.
• Caltex Australia Ltd (ASX: CTX, OTC: CTXAF, ADR: CTXAY)–One ADR is worth two ordinary shares.
• Oil Search Ltd (ASX: OSH, OTC: OISHF, ADR: OISHY)–One ADR is worth 10 ordinary shares.
• Santos Ltd (ASX: STO, OTC: STOSF, ADR: SSLTY)–One ADR is worth one ordinary share.
• Woodside Petroleum Ltd (ASX: WPL, OTC: WOPEF, ADR: WOPEY)–One ADR is worth one ordinary share.
• WorleyParsons Ltd (ASX: WOR, OTC: WYGPF, ADR: WYGPY)–One ADR represents one ordinary share.

Technology

• Redflex Holdings Ltd (ASX: RDF, OTC: RFLXF, ADR: RFLXY)–One ADR is worth eight ordinary shares.

Telecommunications  

• Singapore Telecommunications Ltd (Singapore: ST, ASX: SGT, OTC: SNGNF, ADR: SGAPY)–One ADR is worth 10 ordinary shares.
• Telecom Corp of New Zealand Ltd (ASX: TEL, NYSE: NZT)–One ADR is worth five ordinary shares.
• Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY)–One ADR is worth five ordinary shares.

Utilities

• AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY)–One ADR is worth one ordinary share.
• Origin Energy Ltd (ASX: ORG, OTC: OGFGF, ADR: OGFGY)–One ADR is worth one ordinary share.