Share payouts bounce back with bigger gains to come
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.