Shareholders set for $24bn in dividends

Shareholders in Australian companies will receive around $24bn in dividends following the earnings season.

Investors in Australian stocks will receive around $24 billion in dividends in coming months as a record number of companies return cash to shareholders. Undeterred by modest profit growth, 92 per cent of companies that posted full year earnings in August will issue dividends, with most of those maintaining or lifting payouts, a new report from CommSec says.

That defies expectations that many dividend payments would be cut or halted, CommSec chief economist Craig James said.

“The thinking was that the size and spread of dividend payouts was unsustainable. But that simply is not happening,” he said.

The most recent reporting season proved encouraging, with half of 139 companies assessed by CommSec recording double-digit growth in full year profit. Only 16 companies - or 11.5 per cent - did not report a profit for the year to June.

“It is abundantly clear that corporate Australia is making money, serving to top up high cash balances and thus allowing companies to keep paying dividends to shareholders,” Mr James said.

“The desire to return money to shareholders simply wouldn’t be possible if companies weren’t making money or weren’t expecting to make money in the future.” Improving company performances are yet to translate into similar gains in share prices, Mr James added.

Compared to the Reserve Bank’s official cash rate of 1.5 per cent, the average dividend yield for listed companies is around 4.2 per cent.

“Ordinarily the super-normal return from equities would lead to more money entering the share market and pushing up prices,” Mr James said. “And while that is occurring to some extent, it’s not occurring to the extent that the high differential would suggest.”

A record 92 per cent of companies that reported full-year earnings results will issue a dividend, with the majority maintaining or lifting payments, the CommSec found.

“The desire to return money to shareholders simply wouldn’t be possible if companies weren’t making money or weren’t expecting to make money in the future,” CommSec chief economist Craig James said.

AAP