Share pay­outs bounce back with big­ger gains to come

Townsville Bulletin - - The Goss - by An­thony Keane

SHARE div­i­dend pay­outs bounced back dur­ing last month’s profit - r eport­ing sea­son, but many of our big­gest stocks have yet to re­turn to their highs of 2007-08.

Just as with profit growth, re­source-re­lated com­pa­nies dom­i­nated the div­i­dend in­creases, with Rio Tinto, Calt e x , W e s f a r m e r s a n d OneS­teel all lift­ing pay­outs by 18 per cent or more.

Fortescue Met­als de­clared its maiden div­i­dend and other re­sources com­pa­nies dou­bled theirs, but sev­eral sec­tors are do­ing it tougher.

The lat­est pay­outs from half our 20 big­gest stocks are still be­low 2008 lev­els.

Mac­quarie Pri­vate Wealth d i v i s i o n d i r e c t o r P a u l Kirch­ner says div­i­dends are tak­ing longer to re­claim their pre­vi­ous highs bec a u s e many c o mpani e s is­sued new shares to raise money dur­ing the global fi­nan­cial cri­sis.

‘‘ More share­hold­ers are get­ting part of the pie,’’ Kirch­ner says.

He also says some in­dus­trial stocks are suf­fer­ing from an econ­omy ‘‘ pretty flat in a num­ber of ar­eas’’.

‘‘ The man in the street is prob­a­bly strug­gling be­cause of the high cost of liv­ing, and not spend­ing as much.’’

How­ever, if the econ­omy strength­ens ‘‘ div­i­dends will grow, be­cause com­pa­nies are run leaner and meaner and stronger than be­fore’’.

Mor­gan Stan­ley Smith Bar­ney says 75-80 per cent of com­pa­nies met or ex­ceeded profit ex­pec­ta­tions in the re­port­ing sea­son, but profit growth gen­er­ally out­stripped div­i­dend growth.

S e n i o r v i c e - p r e s i d e n t , wealth man­age­ment David Robin­son says most ma­jor stocks should be back to 2007 lev­els by later this year.

‘‘ Stocks that have not re­turned to those lev­els have m o r e c o m p a n y - s p e c i f i c is­sues, or have re-based their pay­out ra­tio,’’ he says. He is pos­i­tive on out­look. ‘‘ Over­all, we are fore­cast­ing the div­i­dend yield on the ASX200 to rise to 4.4 per cent in 2011 and 4.8 per cent in 2012, mean­ing that in­vestors should be very happy with div­i­dend growth in the next 12-24 months,’’ he says.

‘‘ In par­tic­u­lar, some catchup growth from the bank­ing sec­tor is an­tic­i­pated.’’

A pa­per by Rus­sell Re­search warns against fo­cus­ing on div­i­dend yield alone.

It says also look at his­tor­i­cal div­i­dend yield, for­ward­look­ing yield and tra­jec­tory.

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