Dividend yields entice investor cash

New Zealand shares rose as continued demand for better returns from investors faced with local interest rates drove up leading companies including Auckland International Airport and Fletcher Building. A2 Milk fell as investors continued to sell a stock that reached a record high at the end of 2015.

The S&P/NZX 50 Index gained 12.92 points, or 0.2 per cent, to 7037.30. Within the index, 26 stocks rose, 18 fell and six were unchanged. Turnover was $178 million.

Auckland Airport, the biggest company on the bourse by market value, rose 2.6 per cent to $6.42 and Fletcher Building, the nation's biggest construction and building products group, rose 1.8 per cent to $8.91. Heartland Bank climbed 2.4 per cent to $1.28 and Tower rose about 2 per cent to $1.57.

"There's still a huge weight of money, people with term deposits rolling off and not happy with their re-investment options," said Greg Easton, an adviser at Craigs Investment Partners. "The differential between dividend rates and bond yields is still very high."

Easton said he doesn't expect the flow to abate any time soon, and may continue for the next 12 to 18 months or even longer, given New Zealanders historically had a lot of money in term deposits and the banks.

Westpac Banking Corp rose 2.5 per cent to $32.65 and ANZ Banking Group edged up 0.04 per cent to $26.68, as Australia's S&P/ASX 200 Index rose.

Ryman Healthcare rose 1.8 per cent to $9.79 and Summerset Group gained 0.2 per cent to $4.74, while Metlifecare slipped 0.3 per cent to $5.89.

A2 Milk tumbled 9.1 per cent to $1.40 and was the biggest decliner on the index. "A2 and the health-related stocks have had a fantastic run but sentiment is changing, sometimes daily," Easton said. Some investors "are taking some money off the table because they have done so well".

NZX was unchanged at $1.02 after releasing its shareholder metrics for May, showing the volume of trades in the cash markets jumped 39 per cent last month while the value of trading surged 46 per cent from May last year to $4.3 billion. Coats Group, the UK-based thread-maker left after diversified investor Guinness Peat Group sold its other assets, was unchanged at 61c after announcing it is buying an industrial yarns business and a software company servicing the apparel industry for as much as US$45 million including earn-outs.

Synlait Milk rose about 1 per cent to $3.08 after the Canterbury-based milk processor said it plans to pay farmer suppliers $4.50 per kilogram of milk solids for the 2016/17 season, up from $3.90/kgMS for the 2015/16 season and above Fonterra's $4.25/kgMS forecast.

While Synlait was paying more than the market for milk, it was still low historically and as an input cost reduction that should flow through into high profits, Easton said.

Fonterra Shareholders' Fund fell 2.3 per cent to $5.57.

Among other stocks, Ebos Group fell 2.7 per cent to $16.35, Air New Zealand dropped 3.2 per cent to $2.14 and Sky Network Television declined 3.9 per cent to $4.47.

Steel & Tube Holdings fell 2.5 per cent to $1.92.