Australian dividends rebound set to deliver major financial boost to investor and retiree funds

Sharemarket investors and self-funded retirees are in line for a financial boost, as experts say economic recovery is on track.

Sharemarket investors and self-funded retirees are set to enjoy extra cash this year as dividend payouts bounce back from the slim pickings of 2020.

Mining companies are forecast to lift dividends 70 per cent and banks and property trusts are tipped to deliver solid increases, although investment specialists warn a return to pre-COVID dividend levels is unlikely soon.

Tribeca Investment Partners portfolio manager Jun Bei Liu said this year would be “a big one for dividends”.

“In 2021 we are expecting a dividend increase of 30 per cent in Australia in aggregate,” she said.

“Within that 30 per cent the materials sector dividend will increase close to 70 per cent.”

Tribeca Funds Management’s Jun Bei Liu expects divided rises. Picture: Ryan Osland

Banks were likely to “lift their payouts meaningfully”, Ms Lui said, after several cut and cancelled dividends last year. Other major companies including BHP, Transurban, Suncorp and Insurance Australia Group cut dividends between 30 and 70 per cent amid the pandemic’s uncertainty.

Australian shares have been trading near record highs recently, and Ms Liu said if a correction hit the market this year it should not impact dividend payouts.

“The underlying economic recovery is on track and seems to be very strong,” she said.

CommSec senior economist Ryan Felsman said dividends were “looking a lot more positive than last year”.

“We are expecting a pick-up, and more broadly it will be focused in resources,” he said.

“In terms of earnings we think the banking sector will probably rebound fairly robustly … there’s positive growth in the 2021 financial year.”

However, CMC Markets and Stockbroking chief market strategist Michael McCarthy said banks were still dealing with “huge remediation costs” for past mistakes, scrutiny from regulators, potential bad debts and an uncertain economy.

“I would caution that dividends are likely to be lower for longer in banking and finance than anywhere else,” he said.

“I don’t think you should expect to see pre-COVID levels of dividends any time soon.

“If there’s a big recovery in the economy in 2022 we should see dividends increasing, but with dividends, it’s case-by-case, depending on the business.”

Mr McCarthy said many of the best current sharemarket performers were growth stocks that were less likely to pay dividends.

Citi’s head of equity research, Craig Woolford, said mining companies should “report strong dividend yields from strong cash flow generation and low levels of debt this reporting season”.

“We may see some pay special dividends,” he said.

“Bank sector earnings are also expected to rebound strongly, with growth forecasts of 18 per cent. Credit costs should beat expectations and the resumption of dividends should also be a positive catalyst.”

@keanemoney

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