When the Reserve Bank of Australia (RBA) and Governor Glenn Stevens left its target overnight interest rate, or “cash rate,’ unchanged at 4.25 percent at its April meeting there seemed to be little doubt that it would cut when it meets again on May 1.

“The Board judged the pace of output growth to be somewhat lower than earlier estimated,” read the Apr. 3 statement, “but also thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy.”

Data released since Apr. 3 suggest a cut may not be such a lead-pipe certainty.

The Australian Bureau of Statistics (ABS) reported Thursday that payrolls Down Under rose by 44,000, trouncing consensus expectations of an increase of 6,000. Australia’s unemployment rate held at 5.2 percent against predictions of an increase to 5.3 percent.

And minutes to the Mar. 6 RBA meeting reveal a central bank at least at ease with the state of Australia’s economy, acknowledging differences among sectors and industries but still of a mind that the stronger ones will carry the Lucky Country on to more developed-world-leading growth:

Members noted that the past month had seen an improvement in the prospects for the global economy, with European policymakers making progress in addressing the region’s debt and financial problems. Major downside risks were seen to remain, but the probability of a very bad outcome in the near future had receded a little further.

At the same time, the domestic economy continued to undergo significant structural adjustment in response to the very high terms of trade and the accompanying high exchange rate. A key question was whether the necessary adjustment was occurring at an overall pace of growth that kept the economy close to trend and inflation close to target. In this regard, most information thus far had indicated that weakness in parts of the economy–including manufacturing, building construction and parts of the retail sector–was being approximately balanced by the strength in the mining sector and some services industries.

It appears that concern about employment and wages have been assuaged with Thursday’s ABS report. The Australian Bureau of Statistics (ABS) will report inflation data for the quarter ending Mar. 31 on Apr. 24. Inflation is trending down from 3.6 percent for the quarter ended Jun. 30, 2011, to 3.5 percent as of Sept. 30 and 3.1 percent through Dec. 31, 2011. Continuation of this trend was thought to guarantee at least a 25 basis point reduction in the RBA’s cash rate, based on the tenor of the Apr. 3 statement.

The RBA, however, may need more evidence of broader weakness before easing.

Australia’s official interest rate is still among the highest in the developed world.  Official equivalents to the RBA’s 4.25 percent cash rate are 1 percent in Europe, 1 percent in Canada, 0.5 percent in the UK and 0.25 percent in the US.

The RBA will make its next interest rate decision on May 1.

Dividend Watch List

Struggling department store operator David Jones Ltd (ASX: DJS, ADR: DJNSY) slashed its interim dividend by 19 percent and warned that full-year profit may fall as much as 40 percent due to weak consumer spending and the cost of a new sales strategy.

First-half profit fell 20 percent to AUD85 million from AUD105.7 million a year ago, at the bottom end of company guidance but in broadly in line with market expectations. First-half sales fell 6.7 percent to AUD1.01 billion from AUD1.08 billion a year ago.

DJs, along with most of Australia’s retail sector, has seen earnings slide as cautious consumers have reined in their spending in the wake of concerns over the global and domestic economy. Consumers have also shifted their spending to the Internet to take advantage of the strong Australian dollar to buy from overseas websites.

Net profit after tax (NPAT) for the year to Jul. 31, 2012, will fall between 35 percent and 40 precent, implying earnings of AUD100.9 million to AUD109.3 million. The company said it expects “moderate growth” after fiscal 2012. Hold.

GWA Group Ltd (ASX: GWA, OTC: GWAXF, ADR: GWAXY), which manufactures building fittings for homes and commercial buildings, didn’t cut its dividend but has already backed off already downbeat guidance it issued along with fiscal 2012 first-half earnings in February.

The company reported an 11 percent sales decline for the six months ended Dec. 31, 2011, as revenue dipped 1 percent to AUD314.9 million. At the time these numbers were released, on Feb. 14, management forecast a 16 percent decline in earnings before interest and taxation (EBIT). On Apr. 10, however, via a trading update, GWA altered its EBIT decline for fiscal 2012 to 20 percent to 25 percent.

Although management once again confirmed its full-year dividend guidance of AUD0.18 per share, this quick turnabout is cause for concern and at least a place on the Dividend Watch List.

GWA Group is a hold.

Leighton Holdings Ltd (ASX: LEI, OTC: LGTHF) cut its fiscal 2012 profit guidance by about 25 percent to 38 percent, after more unforeseen problems at two key projects. Writedowns on the value of the assets have wiped AUD254 million from its forecast for the year to Dec. 31.

Management now expects a full-year underlying net profit after tax AUD400 million to AUD450 million; previous guidance was for 2012 NPAT of AUD600 million to AUD650 million.

Australia’s biggest construction company has been dogged by delays and cost overruns at the Airport Link road in Brisbane and a desalination plant in Victoria, including bad weather, complexities in commissioning processes and construction challenges, Leighton said in a statement. Sell.

Twenty-one of 107 companies–now including DJs–tracked in the Australian Edge How They Rate coverage universe declared a dividend lower than the one declared for their prior corresponding period during the recently concluded earnings reporting season.

The business of AE is to identify businesses capable of paying sustainable and growing dividends over time. The corollary of this mandate is to identify those businesses that are not capable sustaining or growing dividends. With recent reductions the following companies have declared as well their worthiness for inclusion on the Dividend Watch List.

Basic Materials

Aditya Birla Minerals Ltd (ASX: ABY, OTC: ABWAF) announced in late 2011 that its board decided to not recommend the payment of a dividend in respect of fiscal 2012 first-half results. The company will report full 2012 (end Mar. 31, 2012) results in mid-June. Aditya Birla is a hold.

Alumina Ltd (ASX: AWC, NYSE: AWC) reduced its final dividend for 2011 by 25 percent, in step with guidance issued late in the year. Alcoa World Aluminum & Chemicals revenue rises 22 percent year over year from 2010 to 2011, but the uncertain economy ahead and its recent history recommend inclusion on the Watch List. It remains a buy under USD1.50.

Aquarius Platinum Ltd (ASX: AQP, OTC: AQPBF) will not pay an interim dividend on its fiscal 2012 first-half results, as sales and production both suffered during the period. Fourth-quarter production was threatened by supply problems in southern Africa that could prove persistent. Sell Aquarius Platinum.

BlueScope Steel Ltd (ASX: BSL, OTC: BLSFF) announced last October that it wouldn’t pay a dividend in respect of fiscal 2012 first-half results. The company is struggling to adjust to competitive pressures from steel producers in lower-cost Asian markets. Government aid will help, but this transition is not for dividend-focused investors to wait out. Sell BlueScope Steel.

Independence Group NL (ASX: IGO, OTC: IPGDF) reported a significant statutory loss on the writedown of a recently acquired asset. Production issues, which could be a continuing problem, and lower realized prices, which could turn, are the real questions following a 50 percent reduction in the company’s interim dividend. Independence Group is now a hold.

OneSteel Ltd (ASX: OST, OTC: OSTLF, ADR: OSTLY) is paying a AUD0.03 per share dividend, down 50 percent from the AUD0.06 it paid for the first half of fiscal 2011. But this is now a different company, one focused on its iron ore mining operations and away from its steelmaking past. Management has formally announced its intent to change the company name to Arrium to reflect the new direction. Promising results from its mining operations for the recent period suggest management is on to something. Decision-makers expect “significant improvement” in fiscal 2012 second-half results. OneSteel is now a buy under USD0.80.

Panoramic Resources Ltd (ASX: PAN, OTC: PANRF) is paying 50 percent less with its fiscal 2012 interim dividend than it did a year ago, as lower realized prices for nickel offset double-digit production growth. Management lifted full-year production guidance, but policy required a lower investor payout. Panoramic Resources is a buy under USD1.60.

Western Areas NL’s (ASX: WSA, OTC: WNARF) 50 percent lower interim dividend is the result of lower sales. Realized prices for its nickel offset higher production, though costs trends were positive and management reiterated full-year guidance. Western Areas is a hold.

Consumer Goods

Billabong International Ltd (ASX: BBG, OTC: BLLAF) cut its interim distribution by 81 percent, but this is likely an interim step on the way to zero. The company is spinning a cash-generating unit into a joint venture with a third party to generate cash to pay down debt. But its ability to pay remaining liabilities will be impaired by the absence of the full cash flow from this asset. The company has also rejected a AUD3 per share cash buyout offer. Sell.

Goodman Fielder Ltd (ASX: GFF, OTC: GDFLF) isn’t paying an interim dividend. Prior-year comparisons make the decision obvious, as revenue was off 3.7 percent and statutory net profit after tax was down 77 percent. But sequential comparisons show a turnaround may be underway. Hold.

Consumer Services

APN News & Media Holdings Ltd (ASX: APN, OTC: APNDF) reduced its 2011 annual dividend by 28.6 percent from 2010 levels. Statutory net profit after tax (NPAT) slid by 24 percent, though revenue rose 1 percent to AUD1.07 billion. Trimming the dividend will provide more cash as the company undertakes a tough transition to outdoor advertising. Sell.

Harvey Norman Holdings Ltd (ASX: HVN, OTC: None) trimmed its interim dividend by 16.7 percent, as fiscal 2012 first-half net profit after tax (NPAT) slid 2.1 percent on an 8.2 percent decline in sales. Harvey Norman is now a sell.

Southern Cross Media Group Ltd (ASX: SXL, OTC: SOUTF) management highlighted the fact that “like for like” revenue was off only 2.7 percent from the first half of fiscal 2012 compared to the prior corresponding period. Unequivocal good news can be found in the conclusion that cost-control efforts exceeded expectations; coupled with the cash saved from a 28.6 percent interim dividend reduction Southern Cross should be able to continue to ride out challenging advertising conditions. Southern Cross is a buy under USD1.25.

TABCORP Holdings Ltd (ASX: TAH, OTC: TABCF) reduced its interim dividend by 45.8 percent from AUD0.24 to AUD0.13 per share, a move management said was “in line with stated policy.” Hold.

Financials

QBE Insurance Ltd (ASX: QBE, OTC: QBEIF) reduced its 2011 dividend by 32 percent from the rate it paid in 2010; 2011 was a year marked by “unprecedented natural catastrophes and challenging investment markets,” which made hoarding cash a reasonable move. Internal metrics suggest QBE will do well once external conditions improve. For now, however, dividend investors are better off elsewhere. If you own it, hold.

Westfield Group Ltd (ASX: WRT, OTC: WEFIF, ADR: WFGPY) cut its full-year 2011 payout by 24 percent. Australia’s biggest REIT by market capitalization is a hold.

Oil & Gas

Caltex Australia Ltd (ASX: CTX, OTC: CTXAF) paid AUD0.45 per share in respect of 2011 results, down from AUD0.60 in 2010, as profit on a replacement-cost-of-operating-sales basis dropped to AUD264 million from AUD318 million, versus company forecast of AUD245 million to AUD265 million. The stock has run to well above AUD13, past our AUD11 buy-under target, and now rates a hold.

Santos Ltd (ASX: STO, OTC: STOSF, ADR: SSLTY) paid 18.9 percent less to shareholders in 2011 than it did in 2010, as it posted a 5 percent reduction in production. Santos remains a buy under USD13.50.

Utilities

DUET Group (ASX: DUE, OTC: DUETF) announced in mid-2011 that it would reduce its payout by 10 percent to reduce debt. The stock remains a hold.

Spark Infrastructure Group (ASX: SKI, OTC: SFDPF) reduced its 2011 payout by 25.1 percent, but management forecast 5 percent distribution growth for 2012. Spark Infrastructure is a buy under USD1.40.

The ADR List

Cochlear Ltd (ASX: COH, OTC: CHEOF, ADR: CHEOY), which researches, manufactures and distributes cochlear implants to the developed world, is new to How They Rate coverage this month in the Health Care group. There’s more on Cochlear and how it fits within the global health care market in this month’s In Focus feature, Demographics, Disease and Dividends.

Cochlear trades as an unsponsored American Depositary Receipt (ADR) under the symbol CHEOY on the US over-the-counter (OTC) market. Cochlear’s ADR is worth 0.5 of its ordinary Australian Securities Exchange (ASX)-listed share.

Cochlear’s ADR is a buy under USD33.

We’ll 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.
• BHP Billiton Ltd (ASX: BHP, NYSE: BHP)–One 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.
• Newcrest Mining Ltd (ASX: NCM, OTC: NCMGF, ADR: NCMGY)–One ADR is worth one ordinary share.
• OneSteel Ltd (ASX: OST, OTC: OSTLF, ADR: OSTLY)–One ADR is worth 20 ordinary shares.
• 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)–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

• 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.