Dividends to flow from ASX-listed stocks, but not as much as 2022

Shareholders are set for a mixed bag of dividends in the next two months amid a broad bout of weakness including smaller profits from resources stocks | See the list of big payers

Share dividends have lost some of their shine as high interest rates and weaker profits prompt some shareholders to consider other investments.

Overall dividend payouts from last month’s reporting season are about 18 per cent lower following a sharp fall in overall corporate earnings, with 47 per cent of companies lifting their dividend and 26 per cent cutting, according to CommSec.

A total of $34.5bn will be handed to shareholders over the coming two months – down from $42.3bn for the same period in 2022, it says.

The biggest payday for shareholders will be on September 28 when BHP, the Commonwealth Bank, Telstra, Woodside, Santos, Fortescue Metals, IGO and Insurance Australia all deliver at once.

September 27 will be lucrative too, with Coles, Woolworths, Worley, Ampol, Amcor, ASX, Endeavour, Pilbara Minerals and Iluka Resources paying on that day.

The key reason for the recent dividend drop has been weaker profits from resources stocks after a stellar few years, but analysts say a potential large stimulus package from China in the months ahead could be a positive for profits and dividends.

Baker Young managed portfolio analyst Toby Grimm said the lower dividends reflected “the normalisation of earnings of the big miners and energy companies after exceptional profitability the preceding year”.

However, the size of some dividends unveiled in the reporting season were a positive surprise, Mr Grimm said.

“Companies paid a little more than what we were expecting,” he said.

As for the outlook, strong across-the-board earnings growth was not expected and this meant higher dividends were less likely, Mr Grimm said.

“The earnings environment for banks is slightly better, and they tend to be slightly higher dividend payers. A lot of investors hold the banks and may see a little growth.”

Mr Grimm said some companies were holding onto profits amid economic uncertainty, and others were diverting money to debt repayments “that’ have become more expensive” rather than higher dividends.

He said there was no doubt that dividends were losing some lustre as cash and fixed interest products became more attractive after the large interest rate rises of the past 16 months.

IG market analyst Tony Sycamore said resources stocks were Australia’s biggest dividend payers, and noted that iron ore prices were currently just over half the US$220 per tonne they reached in 2021.

Mr Sycamore said the cost of mining iron ore, Australia’s biggest export, was between $US28 and $US40 per tonne, so resources giants were still generating significant profits.

“The outlook for commodities remains uncertain, given China is experiencing a slowdown – it’s a big unknown,” he said.

“Banking stocks are continuing to tick over and pay dividends.”

Banks typically paid dividends between 4 and 6 per cent, Mr Sycamore said, “but the issues now is those dividends don’t look quite as attractive when you can get 5.5 per cent putting money in a term deposit”.

He said energy stocks such as Woodside were also paying higher dividends, after crude oil price had rebounded strongly since the pandemic and had their rally extended by Russia’s invasion of Ukraine.

“I see upside in resources stocks because I think China is going to have to stimulate.

Bell Direct’s Grady Wulff says softer conditions should keep dividends subdued.

“The Chinese leadership cannot leave the second-biggest economy in the world to stagnate. That means commodities will go higher and resources company profits will grow.

“That’s providing there is not a global recession.”

Bell Direct market analyst Grady Wulff said the outlook for dividends for the 2023-24 financial year was similar to 2022-23, amid “softer conditions across the board”.

“However, for companies like Pilbara Minerals and other lithium giants, we may see dividends continue to rise as demand for the green commodity continues to grow as the world transitions to cleaner energy,” she said.

“Some companies withdrew dividend payouts in FY23 due to uncertain economic times, and further volatility expected in FY24, while others look to have withheld the funds for investment in technological advancements and AI, which is a key theme we saw across the reporting season.

Ms Wulff said dividends had been a mixed bag overall.

“Some sectors that thrived from unprecedented demand reintroduced dividends, like Flight Centre which paid out $31.2m in FY23 after scrapping its dividend payout in FY22,” she said.

“And some companies that soared in FY22 cut their dividends completely at the end of FY23, including IRESS and Costa Group.”