March-July Will See $22 Billion In Dividends Paid

Australian listed companies are predicted to pay shareholders a collective $22 billion in dividends from March to July, according to CommSec.

It’s good news for investors, with the predicted dividends showing an increase from last year’s payout of around $19 billion over the same period.

It comes after many Australian companies reported stellar earnings results in the latest reporting season.

CommSec reported that of the 142 ASX 200 companies they assessed, all but 8 companies recorded a profit for the six months to December 2016.

That’s despite Australia’s economy recording a 0.5% contraction over the December quarter, after a raft of challenging political events.

In their latest Economic Insights report, CommSec noted that “companies have almost been falling over themselves in the rush to pay out dividends to shareholders”.

 

According to the report, “roughly 88% of the ASX200 companies reporting for the six months to December elected to pay a dividend”, rather than reinvesting or paying down debt.

It’s worth noting that 88% is actually a 2-year low point in terms of the number of companies paying dividends, with the year to June 2016 seeing 92% of ASX200 companies electing to pay dividends.

AMP Capital Chief Economist and Head of Investment Strategy Shane Oliver told the ABC as much, saying that “the Australian share market is one share market that pays pretty good dividends,” and that “there’s very few share markets around the world that pay such high dividends”.

Low rates of reinvestment

However, some are raising concerns in relation to the currently low rates of reinvestment, with CommSec Chief Economist Craig James telling the ABC that he thinks “there is still concern about embracing growth in the current environment”.

“I suppose we get back to the GFC and, when you look at consumers and businesses around the globe, there is still a reluctance to embrace operations of putting money back into business, trying to grow your business,” James said.

 

Mr Oliver on the other hand, argues that coming years will see increased rates of reinvestment once the country’s economic future becomes clearer.

“Investment outside the mining sector in Australia has been lacking but, as the economic outlook becomes a bit more certain, a bit more secure, we should start to see a bit more of the focus shifting towards investment as opposed to paying out dividends,” Oliver said.

“But I don’t think companies are going to cut their dividends though, it might just be the case that they will start to slow down the growth rate of dividends compared to the growth rate of profits.”

After the initial wave of cash payouts last week, the 3-week period beginning March 27 will see the bulk of the predicted payouts occur, with dividends totalling $17.4 billion to be paid out by listed companies to their shareholders.

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