WEEKLY E-MAIL

19 November 2021

AUSTRALIA OUTPACES THE WORLD ON DIVIDEND GROWTH

By James Malliaros

Australian dividends have recovered from the losses in 2020 that resulted from the onset of the COVID pandemic, with year-to-date dividend growth outpacing global performance, according to new research.

The latest Janus Henderson Global Dividend Index recorded a 126% jump in Australian dividends in the September quarter, reaching a record $41.9 billion, well above the 11.3% growth recorded for the rest of the world.

Payouts during the quarter were boosted by rising commodity prices which saw mining companies account for over 60% of all dividends locally. Three quarters of the mining companies monitored by Janus Henderson at least doubled their dividends compared to the same quarter in 2020. In fact, it is expected that BHP will be the biggest dividend payer in the world this year with a total payout of $25.6 billion from both its Australia and UK businesses.

The local financial sector also contributed to the record high dividend growth, as all four major banks have increased their payouts. Full-year dividends for the banking sector are expected to be just 15% lower than their pre-pandemic level.

Dividends are recovering quickly for a number of reasons. First, the damage to company profits through the pandemic has been less severe than anticipated, with companies adapting quickly to minimise the impact of the crisis on their operations. Secondly, cash flow, which is necessary for the payment of dividends, fell less in aggregate than profits. Companies were also helped by accessible credit markets and various government support schemes.

The latest edition of the report highlighted that companies have used their financial flexibility to bolster their balance sheets with new borrowing, new equity or new hybrid capital issuance – this has given them substantial financial firepower as the world economy recovers.

The outlook for dividends remains positive. The corporate world is also awash with liquidity, with companies holding a record $5.2 trillion in cash on their balance sheets. Much of the surplus cash will be devoted to investment, acquisitions and share buybacks, but some of it will find its way to shareholders via dividends too.

Source: Janus Henderson Investors

Headline growth for dividends globally is estimated to reach 15.6% in US dollars for 2021, bringing dividends for the year to a record $1.93 trillion.

And in good news for Australian investors, according to the Janus Henderson report, Australian dividends are forecast to grow by 60% in 2021, four times faster than the rest of the world.

James Malliaros
Senior Financial Planner
Certified Financial Planner®
SMSF Specialist Advisor™
Authorised Representative No. 291633

If you have any questions or comments, please email me at james@gfmwealth.com.au

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