Best bets for dividend payouts listed by UBS analysts

As many companies abandon dividend payouts to conserve cash, UBS lists some it thinks offer better prospects.

Analysts at investment bank UBS have selected Aurizon, Ausnet Metcash, Coles Group, APA Group and Woolworths as having the best prospects for investors focused on dividend payments.

This is at a time that companies, such as those in the financial services space, abandon their payouts to conserve cash on the back of the coronavirus crisis.

UBS says so far, 38 stocks in the ASX 200 have suspended, deferred or cut dividends and a further 60 have seen dividend per share forecasts fall by more than 20 per cent.

But the analysts believe AGL Energy, Amcor, Brambles, Bunnings landlord BWP Trust, CSL, Inghams, Kogan, Magellan, ResMed Rural Funds, Wesfarmers, Telstra and Clover Corporation will provide reliable earnings streams.

However, in a research note, the UBS analysts highlight SkyCity, Sydney Airport, JB Hi-Fi, Scentre Group, Challenger and Vicinity Centres as having dividend payout expectations that are too high.

Other companies likely to pay a smaller dividend in the year ahead, or no dividend, are Alumina, ANZ, NAB, Northern Star, Oz Minerals, QBE, Servcorp, Stockland, Western Areas and Westpac.

“It is likely that many other stocks will also reduce dividends, either in line with

payout ratios or via a reduction in payout ratios, due to the COVID-19 downturn,” the UBS analysts said in their research note.

It comes as Australian boards examine ways to conserve capital, with further dividend cuts likely.

Bans on bank dividends have been imposed by the Bank of England, European Central Bank and RBNZ, as well as on buybacks and dividends from companies receiving US government loans.

The Australian Regulatory Prudential Authority has said Australian banks and insurers should “seriously consider” deferring dividends.

“We think a scarcity of income will be a big focus in 2020 and opportunities to outperform due to dividends could be even greater than normal,” the UBS note says.

The analysts say that based on their analysis, they believe dividends could fall by about 30 per cent in the next year.

This would be led by financial stocks - about 41 per cent, resource stocks, down 21 per cent, and industrials, down 20 per cent.