Despite economists’ concern that March job growth would weaken significantly after February’s blockbuster number and January’s upward revision, Australia managed to post a third consecutive month of solid job gains.

According to the Australian Bureau of Statistics, the economy created 18,100 jobs in March, blowing past the consensus forecast of 2,500. And February’s already strong number was revised slightly higher, to 48,200 from 47,300.

These results also helped push the unemployment rate lower by a substantial two-tenths of a percentage point, to 5.8 percent, from what had been a 10-year high. By contrast, economists had predicted unemployment would tick up, to 6.1 percent.

However, the seasonally adjusted labor force participation rate decreased by two-tenths of a percentage point, to 64.7 percent, though that’s still two-tenths of a point higher than the eight-year low hit back in December. The trend participation rate held steady at 64.7 percent.

The total number of hours worked, which can be an important indicator of future labor demand, rose by a modest 0.5 percent month over month and is up just 1.6 percent from the year-ago period.  

Over the trailing three-year period, job growth has averaged 10,200 positions per month, while over the past six months the economy has gained an average of 14,000 jobs per month. So there is definitely some promising near-term momentum, especially when considering that the aforementioned three-year period includes the job growth fueled by the resource boom.

These numbers have prompted some observers to wonder whether the unemployment rate has peaked for this cycle. The financial markets are even betting there’s an 88 percent chance that the Reserve Bank of Australia (RBA) will hike short-term rates by a quarter of a point over the next 12 months, according to data gathered by Credit Suisse.

March also saw a rise for the third straight month in the number of job advertisements in newspapers and on the Internet.

A survey conducted by Australia and New Zealand Banking Group showed that total job ads increased a seasonally adjusted 1.4 percent month over month, following a revised 4.7 percent rise in February. That compares quite favorably with the preceding nine-month period in which this statistic declined in eight out of nine months.

Digging into the Data

Beyond the headline numbers in the latest jobs report, however, the results are somewhat more nuanced. For instance, part-time employment, which is considered to be of lesser quality due to lower pay and higher turnover, was the driver behind March’s job gains.

While part-time employment rose by 40,200 positions, full-time employment declined by 22,100. Over the trailing three-year period, full-time employment has grown by an average of 3,500 jobs per month, while over the trailing six months that pace has slackened to 3,200 jobs per month.

Meanwhile, part-time employment growth averaged 6,700 jobs per month over the past three years, and 10,700 jobs per month over the past six months.

Full-time workers now account for 69.5 percent of the total employed population, with part-time workers comprising the balance.

This cautious approach to hiring comports with National Australia Bank’s Monthly Business Confidence Index, which has dropped sharply in the six months since its three-year high amid September’s euphoria (or perhaps relief) as the likely outcome of the federal elections became apparent.

While the latest reading from the sentiment index, at 4.1, is still nearly 2 points above its trailing three-year average, it’s down more than 8 points from the September high. Among individual industries, sentiment was strongest in services, construction, and retail. Businesses continue to be worried about uncertainty in the global economy, a tighter federal government, and the recent strengthening in the Australian dollar.

The aussie currently trades near USD0.94, up about 8.4 percent from the currency’s three-year low in late January. Even with this rebound, the Australian dollar still trades about 14.6 percent below this cycle’s high in mid-2011. Even after the aussie’s latest ascent, economists still forecast the currency will decline over the next year or so, to USD0.86.

Australia Makes Another Deal

Despite the continuing challenges facing Australia’s economy, the country’s government continues to make strides in its aggressive pursuit of bilateral free-trade agreements (FTA).

Following their success in concluding a long-stalled free-trade deal with South Korea back in February, this week Australian negotiators inked an FTA with Japan, the country’s second-largest export market, as well as its second-largest trading partner (China ranks first on both counts, while South Korea ranks third).

Two-way trade between Australia and Japan recently totaled AUD69.3 billion. More important, Australian exports to Japan were valued at AUD48.6 billion, or 16 percent of the country’s total exports.

Japan is also a major part of Australia’s resource story, with exports of liquefied natural gas (LNG) and coal each valued at around AUD14 billion per year. In fact, Japan is Australia’s largest market for both commodities, though they’re already imported into Japan duty-free.

In addition to fostering closer economic ties between the two countries, the FTA is expected to be a boon for Australia’s agriculture sector. Indeed, the country is the first major agricultural exporter to win concessions on Japan’s high import barriers. 

Tariffs that were previously as high as 219 percent will be eliminated for wool, cotton, lamb and beer. The deal also marks the first time Japan has agreed to reduce tariffs on beef and dairy, a development worth an estimated AUD2.8 billion to the industry over a 20-year period. In exchange, Australia will lower duties on Japanese cars and household and electronic goods.

So the country continues to make progress in key areas even if businesses and consumers remain understandably cautious.

Dividend Watch List

When it reported fiscal 2014 first-half results on Feb. 12, 2014, management of Goodman Fielder Ltd (ASX: GFF, OTC: GDFLF, ADR: GDFLY) forecast normalized earnings before interest and tax (EBIT) for fiscal 2014 would be “broadly in line” with the result for fiscal 2013.

It did, ominously, add the qualifying statement “subject to market conditions remaining substantially as they were.”

On April 2, 2014, management announced, “Since that release, trading conditions in Australia and New Zealand have deteriorated.” The company also noted that “manufacturing and supply chain cost savings” under its turnaround strategy have been delayed.

And now it expects normalized EBIT for fiscal 2014 to be approximately 10 percent to 15 percent below the current analysts’ consensus of approximately AUD180 million. Goodman Fielder reported normalized EBIT of AUD185.4 million for fiscal 2013.

Goodman Fielder cited reliability in its manufacturing and supply chains, a lower selling price for baked goods, poor performances from its groceries division and higher farm-gate milk prices.

Management also warned that businesses within its portfolio would face writedowns as a result of a detailed analysis of its assets.

“While that analysis is to be completed, the company currently expects to record non-cash impairments, reflecting the deterioration in the trading outlook across the portfolio,” with most damage in the bakery and grocery businesses.

Over the past three years Goodman Fielder has written off more than AUD250 million for restructuring costs, losses from sales of underperforming businesses and asset impairments.

During the third quarter breakdowns at several manufacturing plants hampered its baking division, with the network having to provide increased volumes.

Management described the “aggravation” in reliability of its manufacturing capability as “an ongoing problem. In a daily fresh business, you can’t build inventory.”  Management has been working on reducing its distribution costs but has hit a lot of dead ends.

Goodman Fielder seems to be in a constant state of restructuring, and it’s hard to get a handle on where sustainable earnings actually are in the business.

Management was silent on dividend policy in its most recent profit warning. Goodman Fielder did omit its interim and final dividends for fiscal 2012 and its interim dividend for fiscal 2013 as it grappled with difficult trading conditions.

It resumed its payout with the final dividend for fiscal 2013, paid in November 2013, and paid a AUD0.01 per share interim dividend for fiscal 2014 on April 10.

If Goodman Fielder does pay a final dividend for fiscal 2014 it will likely be closer to AUD0.01 than the AUD0.03 it paid for the prior corresponding period. Hold.

Metcash Ltd (ASX: MTS, OTC: MCSHF, ADR: MHTLY) management announced on March 20, 2014, after January and February results came in below forecast, that fiscal 2014 underlying earnings per share (EPS) will decline by 13 percent to 15 percent versus fiscal 2013.

CEO Ian Morrice attributed the revision to weak results in Metcash’s Food & Grocery business. Following a review of the unit, management expects to take AUD30 million to AUD35 million in non-cash, non-recurring asset impairment charges on non-core retail and other assets when it reports fiscal 2014 results on June 23, 2014.

Following the profit warning, on March 21 management revealed details of its strategic review to address structural challenges, highlighted by capital investment of AUD180 million focused on in-store overhauls and AUD40 million to cut shelf prices and boost market share.

The profit warning coupled with the costs associated with the new strategic spending will likely mean a final dividend at least 50 percent lower than the prior corresponding period.

Intense competitive pressures remain, and management has introduced another layer of execution risk as it attempts to implement its changes, with the significant question of whether these measures will help improve earnings.

Metchash’s competitive advantage is its convenience and ability to cater to local demands and specific requirements. And the outlook for the Australian grocery market is generally positive and should benefit from predicted population growth of 1.5 percent

But consumers right now favor value over convenience, and Wesfarmers Ltd’s (ASX: WES, OTC: WFAFF, ADR: WFAFY) and Woolworths Ltd (ASX: WOW, OTC: WOLWF, ADR: WOLZY) are best placed to benefit from this preference. Hold.

Fiscal 2014 first-half reporting season is done Down Under, with a large number of companies, concentrated in the Basic Materials group, posting dividend reductions, omissions and discontinuations.

Basically the entire Basic Materials section of the How They Rate coverage universe can now be considered on the List because all those companies are exposed to volatile resource prices.

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.

Once again, we have 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.

Basic Materials

Arrium Ltd (ASX: ARI, OTC: ARRMF, ADR: OSTLY) reported a 7 percent increase in fiscal 2014 first-half revenue to AUD3.64 million, while underlying EBITDA grew by 97 percent to AUD503 million.

Management declared an interim dividend of AUD0.06, up from AUD0.02 a year ago. Solid full-year fiscal 2014 results should get Arrium off the Watch List. Hold.

Ausdrill Ltd (ASX: ASL, OTC: AUSDF) reported a 26.9 percent decline in fiscal 2014 first-half revenue compared to the prior corresponding period to AUD424.2 million. Earnings before interest, taxation, depreciation and amortization (EBITDA) slid 34.3 percent to AUD94.1 million, as the mining sector’s slowdown continues to have a deep impact.

Management declared an interim dividend of AUD0.025, down from AUD0.065 a year ago.

We have more on Ausdrill in this month’s Portfolio Update. Sell.

Grange Resources Ltd (ASX: GRR, OTC: GRRLF) reported 2013 revenue of AUD281.1 million, down from AUD331.3 million but in line with guidance. NPAT was AUD25.6 million.

Management declared a AUD0.01 final and a AUD0.01 special dividend. Hold. Hold.

Iluka Resources Ltd (ASX: ILU, OTC: ILKAF, ADR: ILKAY) declared a final dividend of AUD0.04 per share, down from AUD0.10 a year ago.

2013 mineral sands revenue slid 28.7 percent to AUD763.1 million, while EBITDA margin shrank to 32.6 percent from 67.9 percent. EBITDA was down 60.6 percent to AUD295.2 million. Buy under USD10.

Kingsgate Consolidated Ltd (ASX: KCN, OTC: KSKGF) omitted its interim dividend for fiscal 2014 after it did the same for its final dividend for fiscal 2013.

Revenue was AUD165.1 million, up from AUD161.7 million for the prior corresponding period. Management reported a statutory loss of AUD4.9 million, as higher gold sales volume was offset by lower received prices and rising costs at the Challenger mine. Hold.

Newcrest Mining Ltd (ASX: NCM, OTC: NCMGF, ADR: NCMGY) didn’t declare an interim dividend after omitting its final dividend for fiscal 2013.

Fiscal 2014 first-half NPAT plunged 88 percent to AUD40 million. Management has cut costs in the aftermath of the gold-price decline, though balance-sheet pressure could force an equity raising as well as a scaling back of production and development efforts. Hold.

Oz Minerals Ltd (ASX: OZL, OTC: OZMLF, ADR: OZMLY) cut its final dividend in half relative to 2012, declaring a AUD0.10 payment.

Revenue for the year was AUD644 million, down from AUD985.7 million in 2012 on lower production and lower gold and copper prices. Underlying EBITDA declined to AUD115.8 million from AUD353.9 million. Buy under USD4.50.

PanAust Ltd (ASX: PNA, OTC: PNAJF) declared a final dividend of AUD0.03 per share, down from AUD0.04 a year ago.

2013 sales revenue ticked up 1.7 percent to USD725 million on higher copper and precious metals sales volumes and higher production, offsetting lower commodity prices. EBITDA slid 17.7 percent to USD272.5 million. Buy under USD3.

Sedgman Ltd (ASX: SDM, OTC: SGTDF) declared an interim dividend of AUD0.02, down from AUD0.03 a year ago.

Fiscal 2014 first-half revenue declined to AUD153.9 million from AUD257.4 million, as several major projects were deferred by clients. Management reported negative EBITDA and a net loss of AUD6.7 million. Hold.

Western Areas NL (ASX: WSA, OTC: WNARF) declared an interim dividend of AUD0.01, down from AUD0.02 a year ago.

Fiscal 2014 first-half revenue was down by AUD9.3 million, but EBITDA improved to AUD65.4 million from AUD58.3 million, as EBITDA margin improved by 20 percent to 45.6 percent on cost savings and productivity improvements. Buy under USD3.60.

Consumer Goods

GUD Holdings Ltd (ASX: GUD, OTC: GUDHF, ADR: GUDDY) declared an interim dividend of AUD0.18 per share, down from AUD0.26 a year ago, when it also declared a special dividend of AUD0.10 per share.

Fiscal 2014 first-half underlying profit declined by 31 percent to AUD14.9 million on a 4.3 percent decline in sales to AUD2998.4 million. Management reaffirmed its forecast for a full-year profit decline of 20 percent. Buy under USD6.50.

Ridley Corp (ASX: RIC, OTC: RIDYF) declared an interim dividend of AUD0.015 per share, down from AUD0.0375 a year ago.

Fiscal 2014 first-half revenue from continuing operations grew by 28 percent to AUD442.6 million, as NPAT surged by 178 percent to AUD9.9 million. EBIT for Ridley AgriProducts was up 33.5 percent to AUD20.7 million. Hold.

Consumer Services

Metcash Ltd’s (ASX: MTS, OTC: MCSHF, ADR: MHTLY) place on the Dividend Watch List is explained above. Hold.

Myer Holdings Ltd (ASX: MYR, OTC: MYGSF) reported fiscal 2014 first-half total sales growth of 0.3 percent to AUD1.737 billion, while like-for-like sales were up 1.2 percent.

Net profit after tax (NPAT) declined 8.1 percent to AUD81 million, cost of doing business was up 2.1 percent, and management declared an interim dividend of AUD0.09, down from AUD0.10 a year ago. 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) reported 1.8 percent growth in fiscal 2014 first-half revenue, as NPAT ticked up by 1.8 percent to AUD45.9 million and underlying NPAT grew 1.1 percent to AUD47.2 million. Television results were solid, though radio expenses were higher than expected.

Management maintained an interim dividend of AUD0.045 per share. Buy under USD1.80.

Tabcorp Holdings Ltd (ASX: TAH, OTC: TABCF) declared an interim dividend of AUD0.08 per share, down from AUD0.11 a year ago.

Management reported a 2.3 percent increase in fiscal 2014 first-half NPAT to AUD74.6 million, as revenue rose 1 percent to AUD1.045 billion. Operating expenses ticked up by 0.9 percent to AUD220.6 million. Buy under USD3.35.

Tatts Group Ltd (ASX: TTS, OTC: TTSLF) maintained an interim dividend of AUD0.08.

Fiscal 2014 first-half revenue from continuing operations declined 3.5 percent to AUD1.49 billion, EBITDA was up 6.7 percent to AUD265 million and NPAT rose 12.2 percent to AUD122 million on record lotteries earnings, growing online demand and cost controls. Buy under USD3.

Financials

QBE Insurance Ltd (ASX: QBE, OTC: QBEIF) reported a steep decline in 2013 cash profit to USD761 million from USD1.04 billion and posted a statutory net loss of USD254 million on weakness in North America

Its four other regions were solid, however, and management boosted the final dividend by 20 percent to AUD0.12 per share.

QBE had cut its 2013 interim dividend by 50 percent, though it was in line with management policy to pay 50 percent of cash profit. Hold.

Industrials

ALS Ltd (ASX: ALQ, OTC: CPBLF) reported a 27.9 percent decline in fiscal 2014 first-half NPAT on a 8.5 percent revenue decline and declared an interim dividend of AUD0.19, down from AUD0.21 a year ago.

Continuing weakness in the global mineral exploration market–ALS’ largest end-market–has revealed itself in these numbers. Buy under USD9.

Boart Longyear (ASX: BLY, OTC: BOARF, ADR: BLGPY) reported 2013 revenue of USD1.22 billion, down from USD2.01 billion in 2012 and posted a net loss of USD620 million.

Management omitted the final dividend after doing the same for the 2013 interim dividend. Hold.

Bradken Ltd (ASX: BKN, OTC: BRKNF) declared an interim dividend of AUD0.15, down from AUD0.20 a year ago, as fiscal 2014 first-half earnings before interest, taxation, depreciation and amortization (EBITDA) slid 18 percent to AUD86.2 million. 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.

Fiscal 2014 first-half revenue declined by 48.7 percent to AUD126.4 million, while EBITDA slid 70 percent to AUD33.1 million. Management reported a statutory net loss of AUD179.8 million and an operating loss of AUD16.3 million, though free cash flow was positive at AUD75 million. Hold.

GWA Group Ltd (ASX: GWA, OTC: GWAXF, ADR: GWAXY) said it wouldn’t pay an interim dividend after announcing a AUD17 million impairment charge to be taken against fiscal 2014 first-half results on its Gliderol garage door business.

Half-year net sales were down 1 percent and like-for-like sales were down 3 percent, as trading EBIT declined by 1 percent Bathrooms & Kitchens revenue was up 7 percent, reflecting strength in residential construction market.

Management expects to resume its dividend with the final payment for fiscal 2014. Buy under USD2.80.

UGL Ltd (ASX: UGL, OTC: UGLFF) omitted its fiscal 2014 interim dividend.

Operating revenue for the period was up 7 percent to AUD2.2 billion, though EBIT declined to AUD78.5 million from AUD85.7 million a year ago. Underlying NPAT dipped to AUD49.7 million from AUD51 million. Hold.

Oil & Gas

Caltex Australia Ltd (ASX: CTX, OTC: CTXAF) declared a final dividend for 2013 of AUD0.17, down from AUD0.23.

Historic cost after-tax profit for the year was AUD530 million versus AUD57 million for 2012, which was impacted by costs related to closure of Kurnell refinery. Underlying profit of AUD504 million was up from AUD366 million. Buy under USD16.50.

WorleyParsons Ltd (ASX: WOR, OTC: WYGPF, ADR: WYGPY) declared an interim dividend of AUD0.34 per share, down 18.1 percent from the AUD0.415 it paid a year ago.

Fiscal 2014 first-half statutory revenue was up 9 percent to AUD4.82 billion, though underlying EBIT declined 29 percent to AUD178.2 million. Operating cash flow surged 84 percent to AUD230 million. Buy under USD16.

Technology

Codan Ltd (ASX: CDA, OTC: CODAF) reported fiscal 2014 first-half revenue of AUD61.1 million, down from AUD135.9 million. The steep slide for the price of gold has had a dramatic impact on metal detector sales.

‘Underlying profit was AUD4.5 million, down from AUD27.4 million, and the interim dividend was down 75 percent to AUD0.015 per share. Hold.

Redflex Holdings Ltd (ASX: RDF, OTC: RFLXF) declared an interim dividend of AUD0.02, in line with the prior corresponding period.

Fiscal 2014 first-half revenue declined by 0.2 percent to AUD69 million, while EBITDA were up 6.1 percent to AUD19.8 million. NPAT was off 14.3 percent to AUD3.1 million. Sell.

SMS Management & Technology Ltd (ASX: SMX, OTC: SMSUF, ADR: SMSUY) reported that first-half revenue was up 6 percent to AUD153.5 million, but NPAT fell by 55 percent to AUD5.8 million.

The interim dividend was down 63 percent compared to the prior corresponding period. We have more on SMS in this month’s Portfolio Update. Sell.

Telecommunications

Telecom Corp of New Zealand (ASX: NZT, OTC: NZTCF) reported a 3 percent decline in fiscal 2014 first-half revenue to NZD1.847 billion, as continuing profit slipped 12.5 percent to NZD147 million. The interim dividend was flat.

Management 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. Hold.

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.
• Atlas Iron Ore Ltd (ASX: AGO, OTC: ATLGF, ADR: AGODY)–One ADR is worth five 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.
• Coca-Cola Amatil Ltd (ASX: CCL, OTC: CCLAF, ADR: CCLAY)–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.
• 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.