CommSec has estimated that more than $36 billion in dividends will be paid out by Australian companies following the latest reporting season.
Investors have already received more than $5 billion in recent weeks, with dividend payments expected to peak next week at $20 billion.
While lower than the $41 billion paid out in dividends during the previous reporting season in August 2021, CommSec estimated that the February 2022 interim reporting season would exceed both February 2021 ($25.8 billion) and February 2020 ($27.5 billion).
Amid market volatility, rising cost pressures and the impacts of recent floods, CommSec chief economist Craig James noted that investors now faced a choice.
“Those investors that still elect to receive dividend payments direct to their bank accounts can choose to spend the extra proceeds, save the proceeds (leave it in the bank) or use the funds in combination with other savings and reinvest into shares or other investments,” he said.
According to Mr James, some investors may take a long-term view and channel their dividends back into the market while others, such as those impacted by recent flooding, would simply welcome the extra cash.
“From an investor perspective, dividend payouts are incredibly important,” he explained.
“Regular income payments to investors can cushion portfolios from the bouts of volatility in sharemarkets, preserving capital. And the extra cash put ‘back to work’ in the sharemarket could help stabilise or even support the ASX during the current bout of volatility.”
Alternatively, Mr James said that some small businesses may be able to use dividends to counteract rising costs, while the retail and travel industries could receive a potential boost in spending as the Easter holiday period approaches.
CommSec reported that 52 per cent of companies had increased their dividends during the latest reporting season while 18 per cent had reduced their dividend payouts.
Including the 11 per cent where dividends remained stable, 81 per cent of companies in total issued a dividend, below the long-term average of 85 per cent.
“Some companies, such as airlines, gaming and travel companies aren’t yet in a position to issue a dividend. And many companies have elected to use cash internally to invest in their businesses as well as to position for opportunities in a ‘living with COVID’ world,” said Mr James.
Of the 138 companies that reported an interim result, nearly 88 per cent delivered a statutory profit, the highest level in two years and close to the long-term average.
“Overall, we concluded that the reporting season was encouraging,” Mr James said.
“While expenses or costs were up as expected, so were revenues. As a result, aggregate profits and cash levels continued to rise.”
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
