Share dividends on the way to investors amid cloudy outlook

Big mining companies slashed their latest dividends, but there are also some positive surprises. See the list of top stock payouts.

Share dividends were subdued in the latest profit reporting season as companies keep extra cash to ride out an expected rocky road ahead.

Most major companies announced half-year or full-year results, and CommSec chief economist Craig James said dividends overall were “slightly softer”, down 3 per cent in dollar terms.

“It’s certainly not the same bumper conditions as it was 12 months ago,” he said.

“Expenses have been rising, inflation has been a problem, and revenue hasn’t kept up to the same extent.”

Heavy dividend cuts by mining giants BHP and Rio Tinto dragged down the figures, but analysts say resources should have a brighter future.

Offsetting the miners’ cuts were notable dividend jumps by The Commonwealth Bank, up 20 per cent to $2.10 per share, Woolworths up 18 per cent to 46c per share, and Woodside up 46 per cent to $2.13 per share.

Mr James said Australian companies were still paying solid dividends, with an average yield of 4.15 per cent, but were more cautious than previously.

“A couple of years ago they did it without too much thought – now it’s a case of ‘perhaps we need to retain some money to get us through what is likely to be a difficult six-to-12-month period ahead,” he said.

“It’s a mixed picture at the moment.”

Mr James said companies would be mindful not to slash dividends, as that could prompt shareholders to switch their allegiance to other companies.

Saxo Markets Australian market analyst Jessica Amir said big mining companies’ dividends were about 50 per cent below last year, but “in the next 12 months I would say it will look very different”.

“It’s a very optimistic outlook,” she said, with Rio and BHP forecasting higher commodity prices in 2023 for metals such as iron ore, copper and metallurgical coal.

“All of these things will be essential to the global economy for the next several years.”

Jessica Amir from Saxo Markets says Australia’s dividends should remain high.

Ms Amir said markets were shifting their focus, after 10 years of focusing on technology stocks that paid little or no dividends, while traditionally-high bank dividends had been impacted by competition in financial services.

“We are going back to the physical world outperforming the intangible,” she said.

Moves to phase out fuel combustion engines would lift demand for metals, Ms Amir said.

Just one electric vehicle required 83kg of copper, 10kg of lithium and 250kg of aluminium, she said.

“Australia traditionally has paid out the best dividends in the world, and that will probably continue for some time.”

The Commonwealth Bank is the only major bank that tracks the regular financial year when it comes to profits and dividends. ANZ, NAB, Westpac and Macquarie will announce their half-year results and dividends in early May.

CommSec’s Mr James said 88 per cent of companies announced a dividend in the February reporting season, with dividends per share up by 5 per cent but their dollar value was down because of the lower payouts from resources companies.

“Just over 53 per cent of companies lifted dividends, 22 per cent cut dividends or pay-outs, with 12 per cent leaving payouts unchanged,” he said.

Originally published as Share dividends on the way to investors amid cloudy outlook