CBA, BHP, Fortescue lead dividend surge for shareholders

Stockmarket investors are about to receive a cash windfall from many of Australia’s biggest companies. | SEE THE LIST

Almost $40bn will land in the laps of investors and super fund members over the next month as corporate Australia pays out a pile of Covid-rebound dividends.

Commonwealth Bank, BHP and billionaire Andrew Forrest’s Fortescue Metals have led the charge with huge increases in payouts, but shareholders are being warned not to expect the same growth rate in the year ahead.

AMP Capital head of investment strategy Shane Oliver said companies were playing catch-up after more than half cut or cancelled their dividends during 2020. “It’s a record year for dividends flowing through to shareholders, up around $40bn,” he said.

Most of the cash will be delivered in the last two weeks of September, although several stocks have already paid, including most property trusts, Australian Foundation Investment Company, and Domino’s Pizza Enterprises yesterday.

CBA’s final dividend more than doubled to $2 a share – up from 98c in 2020 – and will be paid on September 29. Its rise suggests that the other major banks – Westpac, ANZ and NAB – will lift their dividends sharply too.

“Twelve to 18 months ago the banks provisioned for sharp increases in non-performing loans and people defaulting on mortgages, and that never happened,” Dr Oliver said.

“So consequently that money put aside is freed up,” he said.

CommSec chief economist Craig James said some caution among companies remained, with 19 per cent of companies not declaring dividends – above the long-term average of 15 per cent. These include businesses hit hard by Covid-19 such Qantas, Flight Centre and Crown Resorts.

Mr James said in 2020 many businesses were not in a position to pay dividends but were now “rewarding shareholders for their loyalty”.

He said the biggest bunch of dividends would be paid during the week starting on September 20, totalling $15.2bn, while another $13.6bn would be paid the following week.

Commsec chief economist Craig James, says some companies remain cautious about paying dividends. Picture: Justin Brierty

“The miners reported particularly strong dividend yields courtesy of a resurgence in commodity prices, which have boosted cashflows and balance sheets,” he said.

Iron ore giant Fortescue’s final dividend more than double from $1 to $2.11, BHP’s more than trebled to $2.72, as did Rio Tinto’s – up from $2.16 to $7.60.

Ausbil Active Dividend Income Fund portfolio manager Michael Price said the three big miners would not repeat the feat in 2022.

“Passive income investors who are waiting to collect another big dividend from the iron ore boom will go backwards,” he said.

“While we are not expecting another big dividend boom from the iron ore sector, we see a recovery economy and increasing corporate earnings benefiting the broader sector.”

Company profits climbed 49 per cent in 2020-21, and analysts are forecasting modest growth of 6 per cent this financial year.

Originally published as CBA, BHP, Fortescue lead dividend surge for shareholders