Almost $26 billion will be paid out to shareholders after four in five ASX 200 companies that reported a half-year result declared a dividend during the February reporting season, according to research from CommSec.
This is up from $21.6 billion in the August 2020 reporting season, but down from $27.5 billion in the February 2020 reporting season, which later saw many companies shelving or cancelling their dividends in response to the coronavirus crisis.
The improved dividend payouts come after 86 per cent of ASX 200 companies reported statutory profits for the six months to December 2020. Of the companies to report a profit for the half-year to December, 60 per cent managed to lift earnings while 40 per cent recorded a fall in earnings.
However, aggregate cash at hand was up over 50 per cent on a year ago, rising from $82 billion in February 2020 to $124 billion now, as companies still remain wary about paying out most of their statutory earnings.
CommSec Chief Economist Craig James said: “While more companies are in a position to issue, or even increase dividends, many are exercising caution. Other companies, such as those dependent on movement of people across foreign borders may not be in a position to pay dividends.”
Dividend payments from the interim reporting season are expected to be completed by early May with some companies starting distributions in February. Most will pay their investors throughout the five week period that began Monday, 15 March.
The largest week for dividend payments will be the week ending 26 March, with around $12 billion to be paid out to shareholders.
Mr James said dividends have taken on greater importance over time, especially as new investors enter the market in response to low inflation and near zero returns on deposits.
“Australian companies have to compete with residential property markets and international shares to secure the affection of investors, and with share prices often constrained by a range of macro influences, that puts more onus on companies to offer attractive dividends or to support share prices with buy backs,” he said.
Many shareholders will receive the dividends as cash, while others will deploy the proceeds through dividend reinvestment schemes. The majority of funds will be paid to local investors, but some will go offshore. Additionally, there will be limitations on the short-term consequences for the economy as returns are paid to superannuation funds as well as retail investors.
“Some investors, especially those running cafes, restaurants, recreation and sporting businesses, may need the extra dollars to fill gaps in cash flows. For some small businesses, there is no choice, it is a case of survival and all funds must be deployed,” added Mr James.
“We remain positive on the outlook for the economy and the share market. But while federal, state and territory governments and the Reserve Bank have guided the economy through the crisis phase, now they will need to be more agile in their responses to economic recovery, especially with the imminent expiry of the JobKeeper wage subsidy.”