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.
ASX dividends break pre-pandemic record
Australian dividends are back to normal. After being battered and bruised during the pandemic, many high-flying dividends were either lowered or pulled as companies feared the worst and bunkered down to save money.
High paying bank dividends were slashed after APRA forced lenders to limit payouts to no more than 50% of profits amid recession fears. But the pandemic wasn’t as bad as first thought. Recent profits show the Big Four are sitting on piles of cash, having not spent during the pandemic. Which means, bank dividends are poised to return to their pre-Covid levels.
Bank shares are a retiree’s favourite, because of their high dividends, fairly defensive and predictable qualities and high profitability. Which is why it was a rare occurrence to see the banks slash their dividends as a result of COVID-19.
Janus Henderson have released a research note which confirms Australian dividends are back to pre-pandemic levels and have eclipsed the last the previous 12-month record set in September 2019.
The fund manager said, “Australian dividends totalled AUD$97.9 billion in the 12 months to the end of March 2022, breaking through the pre-pandemic high watermark by 5.3%, due to strong performances from Australian’s big four banks, and a significant contribution by the mining sector. Australia’s 12 month performance is 81.7% higher than the equivalent period to the end of March 2021, and dwarfs the rebound of the rest of the world (excluding Australia) at 13.6%.”
“The growth is in part due to the ongoing normalisation of payouts following the disruption caused by the pandemic. Q1 2021 saw significant dividend cuts, so it provides a relatively low base for comparison purposes. However, the Q1 2022 growth also reflects the robust post-Covid economic rebound that took place in much of the world in 2021 and into early this year. Globally, 81% of companies that issued payouts in the first quarter increased their dividends year on year and another 13% held them steady,” says Janus Henderson.
The mining sector which represents roughly 25 percent of Australian payouts, doubled its dividend payouts on surging commodities demand, effectively wearing the banking hat during the pandemic.
Strong first quarter sees Janus Henderson upgrade 2022 forecast to US$1.54 trillion (AUD$2.08 trillion), but dividend expectations for the rest of the year remain unchanged given economic and geopolitical uncertainty.
Janus Henderson says, “One dollar in every two paid by Australian companies in Janus Henderson’s index over the last 12 months were distributed by a mining company. Combined, banking and mining stocks have contributed 94% of the recovery in Australian dividends.”
BHP’s dividend is so large that it alone made up almost one third (32%) of all the dividends paid by Australian companies in Janus Henderson’s index between April 2021 and March 2022.
Matt Gaden, Head of Australia, Janus Henderson Investors said, “Australia’s dividend recovery has powered ahead in 2022, on the back of strong commodity prices and the return to form of Australia’s big banks, no longer constrained by the dividend pause required during the worst of the pandemic. However, Australia’s result reflects its continued reliance on banking and mining sectors, and that level of relative sector concentration should be cause for pause among investors.”
