Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Australia joins record quarter for dividends
Dividends are back.
After a Covid-enforced dividend lull, Australian companies are leading the world in dividend payout growth in 2021, with some of the worst-hit sectors, including mining and banks, recovering in full from what was a challenging 2020. Payouts are rebounding, albeit from a lower base.
According to statistics released by Janus Henderson, “Australian year-to-date dividend growth outpaces global performance, with payouts growing by two-thirds. The rest of the world has seen growth of 13.7% as measured in US dollar terms.”
According to the latest Janus Henderson Global Dividend Index, a recovery in the country’s banks and miners has boosted index performance, giving one of the strongest readings since the Index began, “reflecting the pace of Australia’s dividend recovery, which is expected to record growth of 60% in 2021, at a rate around four times faster than forecast for the rest of the world.”
The recovery comes on the back of high commodity prices, which have seen miners’ cashflows recover back towards pre-pandemic levels. Janus Henderson says, “in its most important dividend quarter for the year, Australia’s payouts grew by 126% on a headline basis, reaching a record A$41.9 billion, compared to growth of just 11.3% for the rest of the world. Altogether, Australian companies were responsible for more than a third of the year-on-year A$69 billion global increase in payouts delivered in Q3. This highlights the major contribution Australian companies are making to the global dividend recovery.”
Australia’s recovery also helped boost global dividends by 22.0% in US$ terms, striking an all-time high for the third quarter of US$403.5 billion (A$550 billion). Janus Henderson said: “Three quarters of mining companies in Janus Henderson’s index at least doubled their dividends compared to Q3 2020. Globally, the sector delivered an extraordinary A$74.5 billion of dividends in Q3, more in a single quarter than the previous full-year record set in 2019. Australian mining giant BHP will be the world’s biggest dividend payer in 2021, contributing A$25.6 billion from the combined payouts of its UK and Australian divisions.”
On an equal footing, the financial sector contributed to the overall performance with the big banks pulling most of the weight. Commonwealth Bank lifted its final dividend to near pre-pandemic levels, with ANZ not far behind. NAB and Westpac followed suit, both increasing their payouts.
“A raft of important factors have led to Australia’s outstanding third-quarter dividend performance,” says Jane Shoemake, client portfolio manager on the Global Equity Income Team at Janus Henderson. “First and most importantly, mining companies all around the world have benefited from sky-high commodity prices. Many of them delivered record results and dividends followed suit.
“Secondly, banks took quick advantage of the relaxation of limits on dividends and restored payouts to a higher level than seemed possible even a few months ago. Additionally, Australia has been able to record outstanding results against the backdrop of a very difficult 2020, that saw it suffer from the COVID-19 pandemic.”
Janus Henderson says these exceptional payout figures have improved prospects for Q4 leading the firm to upgrade its forecast for the full year. Janus Henderson now “expects global growth of 15.6% on a headline basis in USD terms, taking 2021 payouts to a new record of A$1.93 trillion. Underlying growth is expected to be 13.6% in USD terms for 2021.”
