Prime Minister Julia Gillard announced Jan. 29, 2013, that the next general elections in Australia will be held on Sept. 14, 2013. The announcement caught pundits and politicians by surprise, as governments typically hold out until the last possible moment to declare elections.

In Australia federal election dates aren’t fixed. But the federal parliament can’t run for more than three years after the day it first meets. Although governments are free to call for elections earlier if they believe they’ll benefit, a minimum campaign period of 33 days must precede the day of voting.

In 1984 then-Prime Minister Bob Hawke called for elections 10 weeks ahead of the vote, and that was considered an abnormally long interval. The upcoming vote will come after seven and a half months’ worth of promise-making and vote-grubbing. It will be the longest campaign in Australia’s history.

When she made her early announcement Ms. Gillard, in addition to breaking long-held convention Down Under, hoped to capture the political momentum and to expose the opposition’s lack of clear policy preferences.

Her plan has backfired.

On Feb. 2, less than a week after Ms. Gillard’s announcement, two members of her cabinet announced their resignations, Nicola Roxon, the attorney general, and Chris Evans, the government’s leader in the upper house.

These not-unexpected departures exacerbated a sense of instability caused by less innocent developments.

On Jan. 31, Craig Thomson, a former federal Labor parliamentarian, was arrested on fraud charges dating from his time as head of the health services union. Mr. Thomson appeared in a Melbourne court on Feb. 6 to deny charges of misusing union funds on prostitutes and personal entertainment expenses.

Mr. Thomson now sits as an independent but still supports the government. His arrest doesn’t directly threaten its parliamentary survival, but it diverts attention from Labor’s case for reelection.

And an ongoing corruption investigation into a former Labor minister in the state government of New South Wales, Eddie Obeid, has also drawn unsavory attention to Ms. Gillard’s party. This scandal could swing the general election outcome in New South Wales and perhaps the country as a whole.

Opinion polls late last year showed the government clawing its way back into a competitive race. But just days after the prime minister announced the Australian election would be held on Sept. 14, the first opinion poll of the campaign showed the ruling Labor Party with the support of only 32 percent of voters. On a two-party basis, Tony Abbott’s Coalition leads Labor by 56 percent to 44 percent, a margin that would translate into an electoral wipeout for Ms. Gillard.

Another poll showed Ms. Gillard’s support as preferred prime minister dropped four percentage points in the past two weeks from 45 percent to 41 percent, while Mr. Abbott’s support rose six points to 39 percent.

About That Tax…

The minority Labor government is also under scrutiny due to the apparent abject failure of one of its highest-profile legislative accomplishments, the Minerals Resource Rent Tax (MRRT).

A parliamentary committee has been tasked with investigating whether concessions granted to mineral giants are responsible for the mining tax revenue ­shortfall, a step that will prolong the political pressure on Ms. Gillard.

A Green Party bill that seeks to fix design flaws in the tax was referred to the House of Representatives Economics Committee after the Australian Treasury admitted this week that it lacked crucial information when it calculated now-failed revenue forecasts for the tax.

Secretary of the Department of the Treasury Dr. Martin Parkinson said mining companies were under no obligation to reveal changes to their starting cost base valuations and other key accounting adjustments used to forecast tax receipts.

Dr. Parkinson told a Senate estimates committee that Treasury’s revenue estimates–including as recently as the mid-year budget update–“drew heavily” on information provided by the resources industry when the MRRT was negotiated after Labor dumped Kevin Rudd and his resources “super profits” tax.

The position of Secretary of the Department of the Treasury is a professional, appointed position similar to that of the Governor of the Reserve Bank of Australia.

The tax raised just AUD126 million in its first six months, in a year in which it was forecast to raise AUD2 billion. Sam Walsh, the chief executive of Rio Tinto Ltd (ASX: RIO, NYSE: RIO), the world’s second-largest iron ore miner, said this week that his company hadn’t paid any minerals resource rent tax. The tax applies only to iron ore and coal.

The committee will examine “the extent of the erosion of Commonwealth revenue due to the minerals resource rent tax’s requirement that increases in state royalties be rebated, the adequacy of the bill to remove this requirement and whether related issues arise in the application of the minerals resource rent tax that also erode Commonwealth revenue.”

It will probe implications for the budget and what concessions the government gave the minerals giants when it renegotiated the tax. Resources Minister Martin Ferguson said the government wouldn’t walk away from the agreements made with the miners.

Dividend Watch List

Because Australian companies typically report official earnings and declare dividends only twice a year, changes–additions to and subtractions from–the Dividend Watch List will be rarer than, for example, the Dividend Watch List compiled for AE’s sister letter Canadian Edge.

Earnings season is well underway Down Under. The vast majority of companies are reporting results for the first half of fiscal 2013, which ran from July 1, 2012, through Dec. 31, 2012. Many others are posting numbers for financial years that correspond with the calendar year, or from Jan. 1, 2012, through Dec. 31, 2012.

New to the Watch List this month is Redflex Holdings Ltd (ASX: RDF, OTC: RFLXF), which is entangled by a corruption investigation in Chicago that threatens to spill over into other jurisdictions, as publicity about the traffic light camera systems company’s possible ill dealings in the Windy City draw scrutiny to the actual efficacy of its core product and service.

Gaming company Tabcorp Holdings Ltd (ASX: TAH, OTC: TABCF) also joins the List after declaring an interim dividend of AUD0.11 per share, lower than the AUD0.13 per share it paid in respect of fiscal 2012 first-half results. The new level better reflects the company’s revenue base following the winding up of a license in New South Wales.

The Watch List now reflects the handful of companies that have reported already as well as those that issued guidance revisions ahead of earnings announcements. There are also names on the List that reduced their payout rates the last time they declared a dividend but have yet to issue fiscal 2013 first-half or full-year 2012 results.

It’s important to note that 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 earnings before interest, taxation, depreciation and amortization (EBITDA).

What this means is that 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 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, 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) won’t report its next set of numbers until on or about May 1, 2013, which will be for fiscal 2013. The company’s fiscal year runs from April 1 to March 30.

Aditya Birla’s board approved and management declared a final dividend of AUD0.05 for fiscal 2012, getting back to a paying basis after “omitting” a mid-year payment. It appears the company pays an annual dividend, but policy remains “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. It is, however, a speculative buy under USD0.50 for aggressive investors only.

Alumina Ltd (ASX: AWC, NYSE: AWC) will report its results for 2012 on Feb. 21, 2013, at which time it’s likely to declare a dividend of AUD0.02 to AUD0.03 per share based on the USD20 million dividend it received from the AWAC joint venture.

Alumina didn’t declare an interim dividend when it reported 2012 first-half results on Aug. 16, 2012. Management had reduced its final dividend for 2011 by 25 percent, in step with guidance issued late that year. Hold.

Aquarius Platinum Ltd (ASX: AQP, OTC: AQPBF) is likely to benefit from the multiple mine outages in South Africa during 2012, as resulting supply shortages should provide a boost for platinum prices in 2013.

But the company is unlikely to resume its dividend in the near future. The company posted a 29 percent in first-half revenue to AUD179 million and posted a net operating cash outflow of AUD38 million. Production declined 27 percent, while the average US dollar PGM basket price was down 10 percent from the prior corresponding period. Hold.

Arrium Ltd (ASX: ARI, OTC: ARRMF, ADR: OSTLY) will report results for the first half of fiscal 2013 on Feb. 19. Management recently announced that the company will take a AUD474 million non-cash writedown on the value of its steel manufacturing unit and its distribution business due to a weak operating environment, sluggish construction activity and the impact of a strong Australian dollar.

Management recently noted that the company remains on time and on budget for its plan to expand port capacity to 13 million metric tons of iron ore per annum and boost sales to 11 million metric tons by June 2014 from 6 million at present, part of its ongoing transition away from steel manufacturing. We’ll revisit our recommendation after management reports fiscal 2013 first-half results on Feb. 19. Hold.

BlueScope Steel Ltd (ASX: BSL, OTC: BLSFF) will report fiscal 2013 first-half results on Feb. 18. The company posted a fiscal 2012 net loss after tax of AUD1.044 billion, better than the AUD1.054 billion loss for fiscal 2011.

A joint venture with Japan’s Nippon Steel Corp (Japan: 5401, OTC: NISTF) that generated about AUD540 million for the company helped it shave AUD580 million in debt.

Management had already “omitted” the interim dividend for fiscal 2012 and didn’t declare a final dividend. It’s unlikely to declare an interim dividend when it reports next week.  Hold.

Fortescue Metals Group (ASX: FMG, OTC: FSUMF, ADR: FSUGY) posted a company-record run rate of 100 million metric tons of iron ore through its Herb Elliott port facility in December following the ramp-up of a second processing facility at its Christmas Creek operation, first iron ore its Solomon mine and the opening of the Fortescue Hamersley Rail Line.

A sharp rise in iron ore prices will likely help Fortescue keep its interim dividend steady at AUD0.04 per share when it reports fiscal 2013 first-half results Feb. 20, 2013, though we’re erring on the side of caution and keeping it on the Watch List. Hold.

Grange Resources Ltd (ASX: GRR, OTC: GRRLF) will also benefit from a sharp increase in iron ore prices during the last four months of 2012.

Grange, which enjoyed a short membership in the AE Portfolio Aggressive Holdings, cut its 2012 interim dividend from AUD0.02 a year ago to AUD0.01.

The company has delayed the start-up of its key growth project, the AUD3 billion Southdown magnetite mine, and reduced spending on it. That preserves cash, though it remains to be seen whether the company will distribute it to shareholders or plow it back into growth initiatives such as a smaller-scale acquisition.

Management will report 2012 results on Feb. 27. Hold.

Iluka Resources Ltd (ASX: ILU, OTC: ILKAF, ADR: ILKAY) noted in a quarterly production update that mineral sands revenue declined 57.9 percent during the last three months of 2012 and that output was down 41.1 percent compared to the same period of 2011. The company will idle its Eneabba mine in March and cutting its CAPEX budget.

All this bodes ill for the dividend announcement that will come Feb. 21, when Iluka reports full 2012 financial and operating results, and for future dividend sustainability. A dividend cut from the AUD0.55 paid a year ago is likely. Hold.

Independence Group NL (ASX: IGO, OTC: IPGDF) noted in its quarterly production report that output at its main mines was ahead of budget during the final three months of 2012. The Tropicana gold mine remains on track for first output by September 2013.

Independence reduced its final dividend for fiscal 2012 from AUD0.07 to AUD0.05, which is the basis for its spot on the List. Recent production news suggests it will be able, however, to maintain the fiscal 2013 interim dividend in line with the AUD0.02 paid a year ago. Hold.

Medusa Mining Ltd (ASX: MML, OTC: MDSMF), an un-hedged, low-cost gold producer, reported a 26.2 percent increase in output from its Co-o mine compared to the third quarter of 2012, while cash costs declined to USD279 per ounce from USD328. Realized selling prices during the fourth quarter of 2012 were USD1,731 per ounce.

The company cut its final dividend by 60 percent to AUD0.02 per share. Medusa is a great way to gain gold exposure and get paid at the same time. Buy under USD6.50.

Mount Gibson Iron Ltd (ASX: MGX, OTC: MTGRF) reported fiscal 2013 second-quarter iron ore shipments were up 52% over the first quarter, while half-yearly shipments surged 86 percent. Increased rail capacity and other efficiency improvements drove the production gains, and the late 2012, early 2013 surge in iron ore prices will likely help the company maintain its interim dividend at AUD0.02 per share when it announces earnings later this month.

Mount Gibson did reduce its final dividend for fiscal 2012 by 50 percent, to AUD0.02 per share. Hold.

Oz Minerals Ltd (ASX: OZL, OTC: OZMLF, ADR: OZMLY), which reported 2012 full-year results on Feb. 13, 2013, reduced its final dividend from AUD0.30 a year ago to AUD0.20. The full-year payout is AUD0.30 per share, which is actually at the top end of management’s policy of paying 30 percent to 60 percent of net profit.

Oz had made the List for a prior reduction in its 2012 interim dividend.

Management’s commentary was relatively bullish, as CEO Terry Burgess forecast higher output and a corresponding decline in cash costs during the second half of 2013 versus the first half. Mr. Burgess also noted a “robust” outlook for copper prices due to strong demand. Buy under USD8.50.

Panoramic Resources Ltd (ASX: PAN, OTC: PANRF) reported within-budget nickel production for the second quarter of fiscal of 2013 and for the first half, though cash costs were slightly above forecast due to a mine shutdown. Management also maintained full-year production guidance. The company will report full financial and operating results for the first half of fiscal 2013 in late February.

Panoramic didn’t declare a final dividend for fiscal 2012 after paying AUD0.02 per share a year ago. It paid 50 percent less for its fiscal 2012 interim dividend than it for fiscal 2011.

This is for speculators on a stimulus-driven global economic turnaround. Buy under USD1.00.

Western Areas NL (ASX: WSA, OTC: WNARF) reported fiscal 2013 second-quarter and first-half nickel production that was in line with guidance. Cash costs, however, were 10 percent below budget. Management also noted in its quarterly production report that it was on track to beat full-year output guidance.

Western Areas cut its final dividend from AUD0.15 a year ago to AUD0.06, as fiscal 2012 revenue was down 29.4 percent on a 29 percent decline for nickel prices.

But Western Areas is Australia’s lowest-cost nickel miner and merits a look from aggressive speculators. Buy under USD4.60.

Whitehaven Coal Ltd (ASX: WHC, OTC: WHITF) was whipsawed by government indecision this month, as regulators at first put off a decision then less than a week later approved the company’s key Maules Creek coal mine. Fiscal 2013 second-quarter sales and output were both higher than the prior corresponding period, but management’s full-year EBITDA guidance was below forecast.

Whitehaven declared a final dividend of AUD0.03, down from AUD0.041 a year ago. Management will report full financial and operating results for the half year on Feb. 26. Hold.

Consumer Goods

Billabong International Ltd (ASX: BBG, OTC: BLLAF, ADR: BLLAY) cut its interim distribution by 81 percent, which we said was likely an interim step on the way to zero. And that’s where we are after management didn’t declare a final dividend in August.

The company, which is now the subject of competing, AUD1.10 per share takeover bids by rival private capital groups, will report fiscal 2013 first-half results on Feb. 22. Management has guided to fiscal 2013 EBITDA of AUD100 million to AUD110 million. Sell.

Goodman Fielder Ltd (ASX: GFF, OTC: GDFLF, ADR: GDFLY) didn’t pay an interim dividend nor did it pay a final dividend for fiscal 2012.

But management announced during a conference call to discuss fiscal 2013 first-half results that it will resume payouts with a final dividend in respect of fiscal 2013, with a stated policy of distributing 50 percent to 80 percent of net profit after tax (NPAT).

First-half sales were down 9 percent compared to year-ago totals to AUD1.17 billion, while normalized NPAT was up 137 percent to AUD51 million. Normalized EBIT was down 17 percent, though net debt was reduced by 35 percent and net free cash flow improved by 81 percent to AUD150 million. That’s enough to earn an upgrade, though this is for aggressive speculators only. Buy under USD0.75.

Consumer Services

APN News & Media Holdings Ltd (ASX: APN, OTC: APNDF) management issued a downbeat trading update in December, noting that the advertising market weakened in the second half of 2012 across all media and that publishing revenue decline 10 percent. Guidance is for full-year earnings before interest, taxation, depreciation and amortization (EBITDA) of AUD150 million to AUD155 million.

APN will report 2012 results on Feb. 21.

APN cut its 2012 interim dividend to AUD0.015 from the AUD0.035 it paid a year ago.

APN reported a net loss of AUD319.4 million for the six months to Jun. 30, which included a AUD485 million writedown on its New Zealand assets. Revenue fell 6 percent to AUD477 million, and EBITDA slid 12 percent to AUD74.9 million. Debt remains a concern. Sell.

David Jones Ltd (ASX: DJS, ADR: DJNSY) noted in a sales and revenue update that fiscal 2013 second-quarter trading activity was in line with the first quarter. Management hasn’t provided full-year guidance. The iconic retailer will report full financial and operating results for the first half of its fiscal 2013 on or about March 21.

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) declared a final dividend of AUD0.04 per share, down from AUD0.06 a year ago, as fiscal 2012 sales revenue slid 9.6 percent, earnings before interest and taxation (EBIT) declined 24.8 percent and net profit after tax (NPAT) fell 31.6 percent. Fiscal 2013 first-quarter sales were down 10 percent. Sell.

JB Hi-Fi Ltd (ASX: JBH, OTC: JBHIF) reported a 2.3 percent increase in fiscal 2013 first-half sales to AUD1.28 billion, as NPAT ticked up to AUD82.1 million from AUD79.6 million. Management declared an interim dividend of AUD0.50, up from AUD0.49 a year ago.

That’s enough to earn it off the Dividend Watch List. It had made its way on after it reduced its final dividend for fiscal 2012 to AUD0.16 per share from AUD0.29.

Management also provided upbeat commentary for the second half of the fiscal year. The stock rallied more than 30 percent on the earnings and guidance, far beyond the level to which its dividend increase would have justified a buy-under target increase. Hold.

Myer Holdings Ltd (ASX: MYR, OTC: MYGSF) cut its fiscal 2012 final distribution to AUD0.09 from AUD0.115 a year ago. The company posted a 1.3 percent decline in sales to AUD3.12 billion, though fourth-quarter comparable sales were up 3 percent and operating profit increased by 1.3 percent to AUD1.29 billion.

Myer will report results for the first half of its fiscal 2013 on or about March 15. Buy under USD2.40.

Navitas Ltd (ASX: NVT) declared an interim distribution of AUD0.093, down slightly from AUD0.094 a year ago. The company reported a 4 percent increase in first-half revenue to AUD355.4 million, while EBITDA rose 5 percent to AUD59.9 million. Management noted a “gradually improving” operating environment.

Navitas reduced its fiscal 2012 final dividend to AUD0.101 from AUD0.12 in fiscal 2011. Buy under USD4.

Seven West Media Ltd (ASX: SWM, OTC: WANHF) cut its final dividend to AUD0.06 from AUD0.24 a year ago, though earnings before interest and taxation came in right at revised guidance at AUD473.4 million. Management forecast low single-digit advertising growth for fiscal 2013, suggesting this difficult period for media companies will continue.

Management did, however, provide quantitative guidance for fiscal 2013 first-half earnings before interest and taxation (EBIT) of approximately AUD250 million and noted signs of stabilization in the advertising market.

Management will report first-half results on Feb. 20. This is a speculation for very aggressive investors. Buy under USD1.65.

Southern Cross Media Group Ltd (ASX: SXL, OTC: SOUTF) is breathing easier after UK prosecutors decided not to file charges related to the station’s Hot 30 show’s prank call to a London hospital during Kate Middleton’s visit in the early stages of her pregnancy. The nurse who accepted the call subsequently committed suicide.

Southern Cross paid a AUD0.05 final dividend, which was actually up from the AUD0.03 it paid as a final dividend for fiscal 2011. But advertising conditions remain weak, and ratings for its TEN TV network are sliding. The company will report fiscal 2013 first-half results on Feb. 19. Hold.

Tabcorp Holdings Ltd (ASX: TAH, OTC: TABCF) declared an interim dividend of AUD0.11 per share, down from AUD0.13 a year ago. First-half revenue from continuing operations was up 2.1 percent, though the company has had to adjust to the loss of New South Wales gaming licenses. EBIT from continuing activities rose 6.5 percent.

Management has now re-based its payout to a new reality. Buy under USD3.15.

Financials

QBE Insurance Ltd (ASX: QBE, OTC: QBEIF) reduced its 2012 interim distribution to AUD0.40 from the AUD0.62 it paid as an interim distribution in 2011. Operating results were actually solid, as net profit after tax (NPAT) was up 13 percent on lower claims. Insurance profit was up 26 percent, and management reiterated its “positive” full-year outlook for underlying insurance margin and profitability.

That, however, was before Superstorm Sandy hit the east coast of the US. Management has said that damage from the storm could mean costs of AUD350 million to AUD450 million for the insurer and reduced its earnings outlook.

And now the company is dealing with what will likely by thousands of claims related to Tropical Cyclone Oswald, though damage from this storm is expected to be less than that caused during the 2010-11 cyclone -season flooding. Hold.

Industrials

Boral Ltd (ASX: BLD, OTC: BOALF) reduced its fiscal 2013 interim dividend to AUD0.05 pr share from AUD0.075 a year ago, though first-half results exceeded expectations and management issued relatively upbeat guidance for the balance of the year.

The company posted a net loss of AUD25.3 million, but profit before significant items was AUD55.2 million, better than management’s forecast. Sales, meanwhile, were AUD2.8 billion.

Boral had cut its fiscal 2012 final dividend by 50 percent to AUD0.035 per share. Hold.

Emeco Holdings (ASX: EHL, OTC: None) reduced fiscal 2013 first-half operating net profit after tax (NPAT) guidance to AUD23 million to AUD26 million from AUD29.2 million. The company also reduced its sustaining capital expenditure budget; though this may help preserve the payout it’s not a good long-term sign.

Management will report first-half results on Feb. 21. Hold.

GWA Group Ltd (ASX: GWA, OTC: GWAXF, ADR: GWAXY) has completed a restructuring that will push about AUD4 million directly to earnings before interest and taxation (EBIT) and boost cash flow. The shares have rallied strongly on the news, rising from a five-year low in mid-November to AUD2.56 as of the close of trading on Feb. 14.

Management has, however, adjusted the company’s payout policy. The company now plans to pay 80 percent to 95 percent of net profit after tax (NPAT), up from 70 percent to 80 percent. But the AUD0.18 per share “floor” that had underpinned the policy has been removed. Buy under USD2.

Leighton Holdings Ltd (ASX: LEI, OTC: LGTHF) maintained its 2012 final dividend at AUD0.60 after it slashed its interim distribution from AUD0.59 per share to AUD0.20 per share.

The company reported 2012 NPAT of AUD450.1 million, just ahead of a management forecast of AUD400 million to AUD450 million issued in December 2012. Previous guidance for 2012 NPAT was AUD600 million to AUD650 million.

Sales for the year rose 6 percent to AUD23.1 billion.

Management noted that it “substantially” deleveraged the balance sheet during the second half of 2012. The forecast for 2013 is underlying NPAT of AUD520 million to AUD600 million, while management expects to return to growth in 2014.

Maintaining the dividend, shedding debt and guiding to growth merit an upgrade for the stock Buy under USD21.

Toll Holdings Ltd (ASX: TOL, OTC: THKUF) maintained its final distribution at AUD0.135 per share, despite chopping its guidance for fiscal 2012 underlying earnings before interest and taxation (EBIT) to AUD400 million to AUD420 million from a prior target of AUD450 million. Fiscal 2011 underlying EBIT was AUD436 million.

The company posted actual EBIT of AUD410.8 million, right in the middle of the revised forecast.

Australia’s largest trucking company and freight handler has a relatively strong balance sheet, and its operating performance remains sound. But external pressures in the form of a weakening Chinese economy and a still-recovering Japanese economy suggest an overabundance of caution is in order.

Management will report fiscal 2013 first-half results on Feb. 20. Hold.

Oil & Gas

Boart Longyear (ASX: BLY, OTC: BOARF, ADR: BLGPY) maintained its 2012 revenue guidance of USD2 billion but reduced its earnings before interest, taxation, depreciation and amortization (EBITDA) guidance to USD310 million to USD320 million from USD360 million to USD390 million due to margin pressures.

The company will report final 2012 results on Feb. 18, 2013, at which time it will likely also reveal a reduced final dividend. Hold.

Technology

Redflex Holdings Ltd (ASX: RDF, OTC: RFLXF) joins the List this month due to a deteriorating situation in Chicago.

The company had previously disclosed an investigation into the relationship between one of its employees and a city official that involved improper benefits passing from the former to the latter. Chicago, which accounted for approximately 13 percent of fiscal 2012 revenue, will not allow Redflex to bid on impending contracts for new traffic light camera installations.

Management has guided to fiscal 2013 first-half NPAT of AUD5 million to AUD6 million, which compares to AUD7.2 million a year ago. The company has also noted “considerable legal expenses” related to the city-led investigation “that have exceeded expectations.”

Management paid an interim dividend of AUD0.03 per share for fiscal 2012, the first time it paid out in respect of first-half results. Redflex will report results on or about Feb. 22. 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.
• 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

• 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.