It looks like we might have to wait a bit longer for the Australian economy’s eventual rebound. Late last week, the Reserve Bank of Australia (RBA) released its quarterly Statement on Monetary Policy, which showed that the central bank has somewhat diminished expectations for economic growth during the trailing-year periods ending December 2014 and June 2015.

The central bank provides some of its forecasts in the form of a range of possible outcomes and adjusted the upper and lower thresholds of each range down by a half-point for each of the two aforementioned periods. The mid-point of each range now suggests potential gross domestic product (GDP) growth of 2.5 percent for full-year 2014 and 2.75 percent for the trailing year ending in June 2015. That essentially pushes back a full recovery to the country’s long-term growth trend by six months later than previously forecast, until the second half of 2015.

Over the long term, the Australian economy has grown at a pace of 3 percent annualized, so economic growth is expected to remain below trend next year, though at the very least no worse than its forecast for this year, which is for growth of 2.5 percent. Fortunately, the RBA’s forecast for full-year 2015 remains intact, with the mid-point of its projected range a healthy 3.5 percent.

What accounts for the change? Among the assumptions underpinning last quarter’s forecasts was that the Australian dollar would weaken to levels near USD0.90 and remain there. That forecast certainly comports with what other institutional economists had been projecting at the time.

But now the bank’s economists show their forecasts are based on the aussie trading near USD0.95 during the forecast period. Though the RBA has been on a rate-cutting cycle since late 2011, the currency had remained relatively strong, even achieving reserve currency status, due to foreign investment during the country’s resource boom.

Another inducement for capital inflows has been the fact that despite eight rounds of rate cuts, the central bank’s short-term cash rate, currently at an all-time low of 2.5 percent, is still substantially higher than equivalent rates among many of the RBA’s developed-world peers.

But since May, the movement in the aussie has been largely correlated with traders’ shifting expectations regarding the US Federal Reserve’s monetary policy (and to a lesser extent the strength of the Chinese economy). First, traders dumped the aussie as the Fed appeared poised to start curtailing its extraordinary stimulus.

But as rates jumped in anticipation of the widely expected September taper, the Fed flinched and chose to defer its decision until a later juncture. Meanwhile, President Barack Obama’s nomination of Janet Yellen to succeed Bernanke as head of the central bank may have even extended the timetable for when the Fed starts to wind down its $85 billion per month bond-purchasing program.

As Bernanke’s key deputy at the Fed, Yellen is known to share his dovish stance toward monetary policy. In appearing before the US Senate’s Banking Committee on Thursday, she said there was no set time for a taper, though it obviously can’t continue indefinitely. She acknowledged that the market’s swift reaction to Bernanke’s comments in the late spring had forced the Fed to defer its taper, but also said the Fed shouldn’t be a prisoner of the market. If confirmed, Yellen can be expected to mirror Bernanke’s approach to policymaking, even if their personal style differs.

That means the aussie likely has a base of support at current levels, which earlier this month the RBA characterized as “uncomfortably high.” The currency recently traded near USD0.937, down about 11.6 percent from its year-to-date high in January, but up 5.3 percent since August. According to a Bloomberg survey of economists, the aussie is expected to trade at USD0.89 next year, while bottoming around USD0.87 in 2016-17.

In the absence of any restraint on the part of the Fed, the RBA will have to lower rates even further. And the real estate market would be an obvious beneficiary of such a move, though pundits and analysts alike have been sounding the alarm regarding an overheated real estate market. Australia’s housing sector never suffered a downturn of the magnitude of that other developed world countries experienced, so it’s been easy for prices to set new all-time highs since their latest ascent began from a relatively shallow trough.

But aside from a resurgent real estate sector, the RBA says that it has yet to see evidence of strong investment in any of the other non-mining sectors of the economy. During the first half of the year, in fact, a small decline in non-mining investment accompanied a much larger drop in mining investment.

While the bank allows that the sustained peak in the resource sector could end sooner than expected, it notes that commodity exports, particularly iron ore, could remain robust. Production volumes are expected to rise as projects funded by the last major round of investment finally come on line. That’s something we’ve covered fairly extensively in recent issues of our weekly Down Under Digest e-letter.

Despite the apparent gloom, the economy could be at an inflection point, as evidenced by the recent improvement in business and consumer sentiment. Sentiment indicators typically reflect attitudes regarding the recent past, in this case, relief that the federal elections were finally over and optimism that the newly elected Liberal-National government’s policies might have a more pro-growth tilt than its predecessors. Still, rosy sentiment can prove fleeting, so it remains to be seen if it translates into actual investment.

Dividend Watch List

Three companies have done enough to earn their way off the Dividend Watch List this month, while another has warned of more tough times that threaten its impressive payout record.

Let’s start with the bad news.

Food and consumer goods marketing and distribution outfit Metcash Ltd (ASX: MTS, OTC: MCSHF, ADR: MHTLY) has compiled a remarkably stable dividend history over the past 10 years, with no cuts, not even during the depths of the Great Financial Crisis.

Competitive pressures, including steep discounting by grocery rivals Woolworths Ltd (ASX: WOW, OTC: WOLWF, ADR: WOLWY) and AE Portfolio Conservative Holding Wesfarmers Ltd’s (ASX: WES, OTC: WFAFF, ADR: WFAFY) Coles unit, and a continuing malaise for Australian consumers threaten to mar that record.

During its 2013 annual general meeting management noted challenging trading conditions during the first quarter of fiscal 2014, singling out its Food & Grocery unit. Metcash expects these difficulties to persist through the financial year.

Management guided for a decline in underlying earnings per share (EPS) for fiscal 2014 in the high single digits.

A rising cost of doing business is cause for concern, and management also must address approximately AUD700 million of aggregate debt maturities in 2014 and 2015.

The company paid a full-year dividend of AUD0.28 for fiscal 2013, good for a payout ratio of 85.9 percent of underlying EPS. Even a 7 or 8 percent decline in underlying EPS, assuming a flat dividend rate, would put a lot of pressure on the payout ratio.

Metcash has undertaken a strategic review, which includes discussion of initiatives to address the issues facing Food & Grocery. Management will provide an update on both the strategic planning process and earnings expectations for the full year on Dec. 2, 2013.

Out of a preponderance of caution, we’re adding Metcash to the Dividend Watch List.

The stock has priced in a great deal of bad news, however, and at these levels yields 8.6 percent. Even a 10 percent dividend cut would leave a yield north of 6 percent if you bought at the top of our buy-under guidance. This is a well-run company that’s facing substantial challenges. And we’re intrigued by what management will offer on Dec. 2.

Until then Metcash remains a buy under USD4.

Mount Gibson Iron Ltd (ASX: MGX, OTC: MTGRF) is off the Watch List after management reported that fiscal 2014 first-quarter production rose 52 percent sequentially to 2.4 million metric tons. Sales were up 10.2 percent to 2.6 million metric tons.

Management reiterated full-year sales guidance of 9.0 to 9.5 million metric tons, as iron ore prices have held up recently around USD130 per metric ton.

Mount Gibson maintained its fiscal 2013 final dividend at AUD0.02 per share. Mount Gibson, which had AUD376 million in cash as of June 30, 2013, is a buy under USD0.50.

TFS Corp (ASX: TFC, OTC: TFSCF) has also made its way off the List. Management declared a final dividend of AUD0.03 for fiscal 2013 after not paying shareholders since November 2011.

Fiscal 2013 net profit after tax (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, as does another investment by an unspecified Middle Eastern sovereign wealth fund that will generate cash proceeds of AUD49 million. Hold.

Harvey Norman Holdings Ltd (ASX: HVN, OTC: None) is no longer on the List either. It boosted its final dividend for fiscal 2013 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.

Global sales for the first quarter of fiscal 2014 were up 2.7 percent to AUD1.37 billion, as like-for-like global sales grew by 4.3 percent. Ireland, Slovenia/Croatia and New Zealand posted double-digit gains on both metrics. Pre-tax profit for the period was up 16.2 percent to AUD58.2 million. Hold.

Fiscal 2013 reporting season Down Under resulted in a number of dividend reductions, omissions and discontinuations, concentrated in the Basic Materials group.

We’ve also seen a number of 2013 full-year and fiscal 2014 guidance announcements, with potential implications for final and interim dividends.

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. 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.

Ausdrill Ltd (ASX: ASL, OTC: AUSDF) management has provided initial fiscal 2014 guidance of revenue of AUD825 million to AUD925 million and net profit after tax (NPAT) of AUD35 million to AUD45 million.

Prior to the announcement the consensus among analysts was revenue of AUD1.06 billion and NPAT of AUD76.1 million. At the midpoint of management’s fiscal 2014 guidance revenue and normalized NPAT would be down 22 percent and 60 percent, respectively, versus fiscal 2013 levels.

Management noted that it expects first-half earnings to be lower than second-half earnings. Ausdrill is now a 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 for fiscal 2013 after cutting its interim dividend by 50 percent to AUD0.05 per share.

Output for the first quarter of fiscal 2014 was off 18 percent sequentially to 50,786 ounces, as cash costs surged by 27 percent quarter over quarter to USD1,044 per ounce. The company’s average realized gold price down 8 percent from the fourth quarter of fiscal 2013 and 20.1 percent year over year to USD1,309 per ounce. Hold.

Medusa Mining Ltd (ASX: MML, OTC: MDSMF) reported that output from the Co-o gold mine was 14,502 ounces, short of its 17,000 forecast due to powercell failure at a new mill. Management noted that second-quarter production will be affected as well due to a delay in repairing the powercell.

Medusa omitted its final and its interim dividends for fiscal 2013, although fiscal 2013 revenue was up 28 percent to USD100.7 million and NPAT was up 2 percent to USD50.2 million while first-half revenue was up 28 percent and NPAT grew by 19 percent.

Management is clearly shepherding cash to its key Co-o gold mine development. Buy under USD2.

Oz Minerals Ltd (ASX: OZL, OTC: OZMLF, ADR: OZMLY) reported that production for the third quarter was below forecast, with mined grades 30 percent to 50 percent lower than expected. Management reduced is full-year copper output guidance and raised its cash cost guidance.

Oz 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. Hold.

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.

Nickel-in-ore for the first quarter of fiscal 2014 was 5,404 metric tons, just off from a near-record total of 5,619 metric tons for the fourth quarter of fiscal 2013. Cash costs did rise to AUD5.65 per pound from AUD5.28, though management reiterated its fiscal 2014 production guidance. Buy under USD0.35.

Sedgman Ltd (ASX: SDM, OTC: SGTDF) declared a final dividend for fiscal 2013 of AUD0.02 per share, down from AUD0.065 for the prior corresponding period.

Management forecast a fiscal 2014 first-half loss of AUD6 million to AUD8 million due to weak trading conditions, though its sees positive earnings in the second half of the year. Hold.

Western Areas NL (ASX: WSA, OTC: WNARF) reported that total mine production for the first quarter of fiscal 2014 was 8,290 metric tons of nickel-in-ore at 5.1 percent, the highest grade since the second quarter of fiscal 2012. Unit cash costs were down substantially for a third consecutive quarter to AUD2.28 per pound.

Western omitted its final dividend for fiscal 2013 after cutting its interim dividend by 60 percent compared to fiscal 2012. Buy under USD3.60.

Whitehaven Coal Ltd (ASX: WHC, OTC: WHITF) management forecast output from its mines will rise by 25 percent in fiscal 2014 to 10.7 million metric tons, though it also expects subdued coal prices and the strength of the Australian dollar to persist.

Whitehaven didn’t declare a final dividend for fiscal 2013 after omitting its interim dividend. Buy under USD2.

Consumer Goods

GUD Holdings Ltd (ASX: GUD, OTC: GUDHF, ADR: GUDDY) management guided to a 20 percent decline in fiscal 2014 underlying earnings before interest and taxation (EBIT), as first-quarter sales and EBIT were down relative to the prior corresponding period. Its Sunbeam and Dexion units were major contributors to the shortfall, and the strong aussie is still a headwind.

GUD’s board declared a final dividend of AUD0.26 per share for fiscal 2013, 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 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.

Myer Holdings Ltd (ASX: MYR, OTC: MYGSF) reported total sales for the first quarter of fiscal 2014 of AUD691.1 million, up 0.44 percent over the prior corresponding period, as like-for-like sales ticked up by 0.41 percent. Management noted that trading conditions remain “patchy.”

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) posted group revenue for the first quarter of fiscal 2014 of AUD503.9 million, up 3.1 percent versus the prior corresponding period.

Reported wagering revenue was up 0.1 percent to AUD385 million, while the Media & International unit grew by 10.1 percent to AUD54.5 million on export of racing and subscriptions.

Tabcorp declared a final dividend of AUD0.08, down from AUD0.11 a year ago. Buy under USD3.35.

Tatts Group Ltd (ASX: TTS, OTC: TTSLF) reported net profit after tax (NPAT) from continuing operations was up 23 percent for the first quarter of fiscal 2014. Management is positive on conditions for the second quarter, which will include the first full period of results from the recently acquired South Australian lottery license.

Tatts’ final dividend for fiscal 2013 was down to AUD0.075 from AUD0.12 a year ago. 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.

Management has guided to fiscal 2014 first-half operating EBITDA of “around” AUD85 million, noting “recent” improvement in order intake. The full-year result is expected to be in line with fiscal 2013. Buy under USD5.25.

Emeco Holdings (ASX: EHL, OTC: None) will pay no dividends prior to June 30, 2014, as it focuses on debt reduction in the aftermath of amending covenants on its AUD450 million senior debt facility.

Emeco 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) is beginning to see the benefits of its December 2012 restructuring, as Bathrooms & Kitchens market share gains led to 31 percent growth in fiscal 2014 first-quarter trading earnings before interest and taxation (EBIT). Sales revenue was up 2 percent, and management guided to full-year trading EBIT of AUD80 million, up from AUD66 million for fiscal 2013.

The full-year dividend for fiscal 2013 was down 33 percent after management declared a final of AUD0.06 versus AUD0.085 for fiscal 2012. 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. 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.

SMS Management & Technology Ltd (ASX: SMX, OTC: SMSUF, ADR: SMSUY) management guided for a decline of 20 percent to 25 percent for fiscal 2014 first-half net income versus the second half of fiscal 2013 due to one-time charges for redundancies and acquisition costs as well as its withdrawal from a contract.

Management expressed confidence in a stronger second half on the contribution of recent acquisitions contribution and a better utilization rate.

SMS 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. Buy under USD6.50.

Telecommunications

Telecom Corp of New Zealand (ASX: NZT, OTC: NZTCF) has guided to a fiscal 2014 full-year dividend of NZD0.16 per share, provided operating conditions remain stable. That’s in line with the fiscal 2013 dividend, which was down by 27.3 percent compared to fiscal 2012.

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 Resorts 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.
• SMS Management & Technology Ltd (ASX: SMX, OTC: SMSUF, ADR: SMSUY)–One ADR is worth two 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.