As earnings season draws to a close, total returns on shares are currently around 7% higher than a year ago, according to a report from CommSec.
Share prices are up around 3% over the period, with the remainder of the gain coming from dividend payments, CommSec chief economist Craig James said in a note.
Describing earnings season as ‘good, but not great’, James highlighted that 91% of full-year reporting companies produced a profit which is above the long-term average of 87%, but below 94% from the February reporting season.
“Overall 91% of full-year reporting companies have elected to pay a dividend,” said James.
“Dividends will remain fundamental to sharemarket returns over the coming year, meaning that accumulation indexes (prices plus dividends) should have greater importance in investor thinking. The current dividend yield sits at 4.12%, well above the 1.5% cash rate.”
Mining, housing related sectors perform
CommSec's report identified the strongest performing sectors as:
- Mining and energy companies, because of cost-cutting and favourable commodity prices
- Packaged foods and meats, on favourable demand and prices
- Housing market dependent companies, as more homes are being built and bought
- Real Estate Investment Trusts.
Challenging times for some
In contrast, CommSec found the following sectors to be experiencing challenging times:
- Consumer-focused companies, due to low inflation, cautious consumers and disruption in the market
- Media with broadcasting and publishing.
Outlook for the next 12 months
James sees corporate Australia in strong shape and well placed to deal with challenges over the coming year such as market disruption, uncertain global politics and low inflation.
“The economy is poised to grow at a faster pace, underpinned by home construction, exports and infrastructure developments. The outlook for global economies is also brighter, especially with improved numbers coming out of Europe and Japan,” he said.
“CommSec continues to look to the All Ordinaries trading in a 5,900-6,100 point range by the end of calendar 2017 with the ASX200 around 50 points lower than the stated range.”