Dividends remain in vogue, with shareholders set to be “well rewarded” following the latest earnings season announcements.
The latest research from online broker CommSec shows around $22bn in dividends will be paid to shareholders over the coming weeks.
Of the major bourses across the globe, Australia is the largest payer of dividends, CommSec Chief Economist Craig James said in a research note, explaining that in part, this reflects the maturity of Australia’s industry sectors.
It also reflects the stability of the companies that dominate the ASX20 and ASX50 indexes and the on-going growth of the Australian economy and corporate profitability.
Since a “low point for shares” was hit following the Global Financial Crisis (GFC) in February 2009, James said investors have been more cautious about buying shares.
Competition from property market
Australian companies have also had to compete with “heady property markets”, putting “more onus on companies to offer attractive dividends or to support share prices with buybacks”.
“Over the past couple of years many companies took the ‘safe option’ of paying out dividends and buying back shares - in other words, keeping shareholders happy. But many companies are now opting for greater balance,” he said.
“Adequate cash must be maintained to pay out dividends. But cash levels as well as modest borrowings are important for reinvestment in the business and applied to new opportunities - entering new markets or engaging in mergers and acquisitions.
“Aussie companies have been successful in recent years in trimming costs and improving efficiencies. But the path to higher profits and retained earnings is also growth of revenues. That objective is more difficult in a globalised world, affected by disruption and technology-driven innovation,” James said.
“Shareholders increasingly realise that it is important to select companies with good potential for solid, sustainable growth in total returns - share price plus dividends - and that means paying attention to all aspects of the business.”
Important information: This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia. In the case of certain securities, Commonwealth Bank of Australia is, or may be, the only market maker.