Weak conditions to dampen $80bn dividend deluge: CommSec

Energy sector weakness and low consumer confidence are expected to lead to a fall in dividend payments this ­financial year, according to CommSec.

Weak conditions in energy, consumer discretionary stocks and real estate companies are expected to result in a fall in dividend payments to shareholders this ­financial year, according to a report by CommSec.

Shareholders in Australian companies received more than $80bn in the year to the end of June, up 5 per cent on the previous year.

But CommSec senior economist Ryan Felsman said the recent weakness in energy prices and the lack of confidence among consumers were expected to hold down total dividend payments in 2024-25, offsetting higher dividend payouts expected from defensive stocks such as utilities.

“We think it’s likely that the dividend payouts from energy companies will come under some pressure,” Mr Felsman told The Australian.

“The dividends of consumer discretionary companies held up very well in their reporting season. But, with the consumer continually being under pressure and retail conditions worsening, it doesn’t auger well for consumer discretionary companies over the next six to 12 months.”

He said persistently high interest rates and weakness in the retail property market would also mean lower dividends from property companies.

Mr Felsman also said listed real estate investment trusts (REITs) were “under pressure, partly from the higher interest rate environment, and partly for property such as retail.

“There will be some pressure in terms of yields and revenues.”

The CommSec report says the 12-month forward estimated dividend yield for the S&P/ASX 200 index is about 3.6 per cent, below the long-run average since 2000, which sits near 4.5 per cent.

“Returns on Aussie shares remain attractive versus bank deposits, bonds and overseas shares with grossed-up dividend yields of around 4.9 per cent,” it says.

“But they are below the decade average of 5.7 per cent.”

The report says Australian shareholders are enjoying a “deluge” of $45bn in dividends from June to October, up by 7 per cent on the previous year.

This is made up of $35bn of dividends to be paid between August and October, on top of the $10bn received from the major banks in late June and early July.

BHP has remained the biggest dividend-payer on the ASX. Picture: William West/AFP

In the financial year just ended, big mining companies cut dividends, while banks and insurance companies paid out more to shareholders.

Mining giant BHP continues to be the biggest single dividend payer on the ASX in dollar terms, paying out $5.54bn. But, this was down almost 10 per cent on the previous year to fund growth in its potash and copper mining projects.

Fortescue paid out $2.74bn to investors with a full-year dividend of $1.97 per share, representing a payout ratio of 70 per cent, up from last year’s 65 per cent ratio. But, CommSec notes its final dividend was reduced by 12 per cent due to lower iron ore prices.

Woodside Energy’s dividend was 13.8 per cent lower than its payment in the first half of the 2023 financial year, as it increased spending in oil and gas fields.

BHP, Fortescue and Woodside were three of the top four biggest dividend payers in the resources sector in the August 2024 reporting season. But, the report notes they paid out $1.5bn less in aggregate than in the same period last year.

Commonwealth Bank was the second-highest dividend payer on the ASX in the reporting period, paying out $4.18bn.

CBA paid out $4.18bn in dividends in FY24.

The report notes while the big four bank dividends appear to be sustainable, they have been compressed to below-average levels. The 12-month forward dividend yield for ANZ, CBA, NAB and Westpac is now at 4.3 per cent, which is below the long-run average of 5.7 per cent since 1997.

Perth-based conglomerate Wesfarmers, whose businesses include Bunnings and Officeworks, will pay out a total of $1.21bn in dividends.

Grocery giant Woolworths declared a final dividend of 57c per share, along with a special dividend of 40c, taking its total payout to $1.18bn.

Other big dividend payers include telecommunications giant Telstra, which will make a $1.04bn payment to investors for the year, and blood products giant CSL, with total payments of about $1.06bn.

It was a particularly strong reporting season for ASX-listed insurers with Insurance Australia Group rewarding investors with a higher full-year dividend of 27c per share, up from 15c.

Suncorp lifted its payout by 63 per cent after it announced plans to pay a fully franked final ordinary dividend of 44c per share.

CommSec says Medibank “super-sized” its dividend, declaring a record final dividend of 9.4c per share for 2024, up 13.3 per cent from 2023.