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What will the corporate dividends look like in 2022-23?
With Australian share market consensus expectations at around a 5 per cent rise over the remainder of 2022, companies won’t receive the same type of pandemic-related stimulus boost that was delivered in 2021.
In saying that, government support will likely remain together with relatively low interest rates over the year. For Australian investors, the value of fully franked dividends will play a bigger part in client portfolios as dividend payments return to pre-pandemic levels. But that all depends on whether Australia has a soft or hard landing.
Portfolio manager of the Ausbil Active Dividend Income Fund, Michael Price, says “corporate dividend payments are back to where they were before the pandemic and the next reporting period should be good for dividend income.”
Ausbil expects a 15 per cent increase in dividend payments for the entire Australian share market in the 2022-23 financial year compared to the previous year; although the firm says the exact growth will depend on whether there is a ‘soft’ or ‘hard’ landing with rising interest rates.
“For the 2023-24 year, we expect a 5 per cent increase in dividend income for the market. Today, just seven companies account for over half (52 per cent) of dividend payments in the Australian market. These include the big four banks and three iron ore miners.”
The big four banks and the iron ore miners have also been the most resilient during the recent market downturn. According to Price, “The iron ore miners currently pay more dividends than the big banks and we believe it is as good as it gets for them in terms of dividend payments, while the level of bank dividends should be able to be maintained longer-term. Telstra also continues to provide a good source of regular dividends.”
| Company | Dividend Yield | DPS | |
| FMG | Fortescue Metals Group | 17.17% | 358.00c |
| RIO | Rio Tinto | 14.60% | 1422.90c |
| BHP | BHP Billiton | 12.23% | 402.66c |
| ANZ | ANZ | 6.34% | 142.00c |
| WBC | Westpac | 6.07% | 118.00c |
| NAB | NAB | 4.98% | 127.00c |
| CBA | Commonwealth Bank | 4.05% | 350.00c |
| TLS | Telstra | 4.15% | 16 |
In 2021, the Australian share market (S&P/ASX All Ords Accumulation index) rose by 17.7 per cent, after a near 4 per cent gain in 2020. Price says the silver lining is to capture both income return and a capital gain, equating to a solid total return at the end of the financial year. “Companies need pricing power to be able to grow their earnings and pay dividends and we see general insurers as having the most potential for special dividends.”
Price concludes by saying, “It is important for income investors to consider a more active approach, capturing dividends from a range of companies rather than buy-and-hold. Overall income and capital gain is more important than just passive income.”
