There is much concern among investors such as retirees, who rely on bank dividends for income, that the Australian Prudential Regulation Authority (APRA) is putting pressure on the banks to suspend or reduce dividends to shore up their capital positions.

Should there be so much angst? Not really, but the situation does impose costs on these investors and require them to reorient their thinking to examine alternatives to relying on dividend cash flows. Unfortunately, overcoming psychological impediments to change can be hard – even if the economics makes sense.