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Australia's biggest ever dividend cash payout

30 Aug 2021 1 month(s) ago

The Australian market has just eclipsed its previous record high dividend payout. It shows once again that the Australian stock market is very different to America's.

Getting solid returns in the Australian stock market is very much related to income from dividends rather than from capital gains (rises in the share prices). A quick comparison of the All Ordinaries Index and the S&P 500 index, makes the point.

In America, returns come from share prices rises and not so much dividends. At the moment this looks pretty good because the US Federal Reserve is printing money and interest rates are extremely low. In five years the index has more than doubled:

In Australia, share price rises of the overall market (All Ordinaries Index) have been much more modest, rising by just over a third in five years:

But that is only part of the story. What matters, as financial advisers will tell you, is what is called the total shareholder return: the capital gains plus the dividends. On that basis the Australian market provides very solid returns.

It is also lower risk. When shares have a strong underlying dividend, their price is less likely to fall than shares that pay poor dividends. It means that the potential downside in the Australian market is probably much smaller than most international markets, especially the US.

What goes up less in good times will probably go down less in bad times.

According to Bell Potter, in this reporting season $38 billion in dividends are expected to be paid – “the biggest ever amount of cash paid in dividends ever.” They note that this eclipses the previous record of $27 billion in August 2019 and “smashes last year’s $20.9 billion.”

The biggest payers of dividends (in absolute size, which does not necessarily mean the dividend yields are high) are BHP, Commonwealth Bank, Rio Tinto, CSL, Telstra, Suncorp and Newcrest Mining.

 

Reader note: This is general reporting only and should not be considered in any way to be investment or tax advice. It does not take into consideration the investment objectives, financial situation or particular needs of any particular investor. For more information please read our disclosure statement.

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