SHIELD – Sustainable High Yield | Bank on yield as currency bounces

Macro Outlook: The yield premium to bonds reached decade high levels while recent economic data removed the recession fears that were weighing on the banks. Australian equities have been sold down on the currency trade through the past 12 months. The current risk/return profile suggests we are likely to see this trade reverse as yield premium widens and USD weakens. The currency led recovery in the market will be driven by the Bank sector. Cheap Pick: VLW is the only low growth cheap yield pick from the SHIELD screen that has average earnings and cash flow per share growth of below 10%, an average of price-earnings and price-cash flow below 10, a dividend yield above 5% and a BUY rating. SHIELD Top 20 picks are: large cap – CBA, WBC, ANZ and TLS; mid cap – MFG, HGG and CGF; small cap – MLX, IMF, OFX, MOC, VLW, CCV, NEC, RRL, CCP and DNA; and micro cap – NCK, IRI and DDR. (VIEW LINK)