A $19bn dividends shower is on its way for investors

Millions of people will receive a huge Easter gift this week with a flood of dividends from Aussie companies. See the payment dates.

Corporate giants BHP, Telstra and the Commonwealth Bank are among companies paying out dividends this week.

A $19bn surge in dividend payouts this week will fatten the bank accounts of shareholders and superannuation funds as profits from the recent reporting season are shared.

Thursday will see the biggest handouts as corporate giants BHP Group, Telstra and the Commonwealth Bank all distribute their dividends on the same day.

The instant wealth boost of dividends is significant, particularly for retirees who are fully or partially self-funded.

JBS Financial Strategists chief executive Jenny Brown said while people accumulating wealth would inject their dividends back into the market through dividend reinvestment plans or other investment purchases, retirees relied on dividends and their attached franking credits.

“It’s a really good cash boost to top up their accounts to continue to fund their pensions on an ongoing basis,” she said.

“For most of our clients, dividends alone fund somewhere between 70 per cent and 80 per cent of the annual pension that they are taking.”

Australia’s sharemarket pays much higher dividend yields than US stocks, largely because of our relative lack of technology-focused companies that reinject profits back into growth rather than pay shareholders.

The gap is currently wider than usual, with the S&P/ASX 200 index dividend yield of 4.4 per cent almost three times higher than the US S&P/500 index yield of 1.5 per cent, and ASX-listed companies have previously been criticised for focusing too much on dividends instead of growing their business.

The dominance of dividend-paying banks and resources stocks in the ASX remains the key reason for the yield gap.

“It’s a different philosophy,” Ms Brown said.

“Clients understand that we chose the companies that pay dividends. Whatever the share price does you are going to get that regular income stream of 4-4.5 per cent fully franked.”

CommSec said about $1.7bn of dividends were given to investors last week, and a “phenomenal” $18.8bn would be paid this week, followed by $9bn over the following three weeks.

It said almost $34bn would be paid out over a nine-week period.

“While profits have fallen over the past six months, companies have been keen on maintaining dividend payments, especially in light of competitive returns on bank deposits, bonds and overseas shares,” CommSec chief economist Craig James said.

“Cash levels have been reduced from historically high levels to meet dividend payments,” he said.

IG market analyst Tony Sycamore said the fact that BHP, CBA and Telstra would pay their dividends on the same day this week was a quirk of timing.

He said payouts typically occurred six weeks after profit announcements once businesses had sorted out their accounts and the mechanics of foreign exchange.

Mr Sycamore said he expected solid dividends over the rest of this year.

“The big banks have done remarkably well from a share price perspective, and their earnings were consistent so they will continue to deliver dividend flows,” he said.

After a recent dip in the iron ore price, the metal bounced back above $US110 per tonne last week and should support BHP, Rio Tinto and Fortescue dividends, helping to keep the overall market’s yield above 4 per cent, Mr Sycamore said.

“The concentration of bank shares and materials stocks will ensure the dividends will continue to flow,” he said.

CommSec’s Mr James said dividends had played a bigger role in shareholder returns since the global financial crisis.

“Many of Australia’s biggest companies operate in mature industries like banks, retailing, health and real estate investment trusts rather than growth industries such as technology,” he said.

“So while many companies continue to make money, growth options are more limited.”

Originally published as A $19bn dividends shower is on its way for investors