Borrow
Should the big 4 banks pay dividends during COVID-19?
The big four banks should heed APRA’s warnings as well as support shareholders through a dividends reinvestment plan, an industry expert has urged.
Should the big 4 banks pay dividends during COVID-19?
The big four banks should heed APRA’s warnings as well as support shareholders through a dividends reinvestment plan, an industry expert has urged.
The call follows a recommendation from APRA to the big four banks to not pay dividends during the COVID-19 pandemic, which is likely to heavily impact investors requiring dividends to live off.
In a letter, APRA asked the banks to “limit discretionary capital distributions” and consider “prudent reductions in dividends”, but stopped short of blocking payouts to shareholders. APRA urged the companies to defer decisions on dividends until the outlook was clearer, and said any payments should be at a “materially reduced level”.
Plato’s managing director, Dr Don Hamson, said underwritten dividend reinvestment plans (DRPs) is a solution that can help address concerns about the ability of lenders to maintain capacity while paying dividends.
“We know many of Australia’s traditional income stocks have DRPs. These companies can choose to underwrite those plans, which effectively means that new shares will be issued matching the dollar value of all the dividends that they pay,” said Dr Hamson.
“For all those investors electing cash rather than the DRP, the company will still issue new shares, which a broker will sell on market during the DRP pricing period. This allows the company to completely preserve its capital as well as paying dividends to those who rely on the income to make ends meet,” Dr Hamson said.
While highlighting that APRA has acted prudently to protect the big four banks, he encourages a dividend reinvestment plan as it will ensure investors who need the income aren’t hung out to dry.
“Destroying the major income stream of thousands of Australians, many of whom are retirees, will put further strain on the economy, which we believe will fall into a deep recession in the June quarter of 2020,” Dr Hamson concluded.
About the author
About the author
Banking
368k Australians potentially eligible for Westpac class action: Are you one of them?
The Federal Court is set to notify 368,000 Australians that they might be eligible to join a consumer credit class action against the big four bank. ...Read more
Banking
Government introduces royal commission laws
The government is striving to implement a number of the royal commission recommendations in a package that was recently introduced to Parliament. ...Read more
Banking
ANZ cops $10m penalty for wrongful fees
The Federal Court of Australia has found that banking giant ANZ engaged in unconscionable conduct and breached its obligations as a financial services licensee. ...Read more
Banking
How $800m could make banking better
The federal government’s digital business plan to drive Australia’s economic recovery “will make banking faster and easier”, according to an industry group. ...Read more
Banking
How sneaky fees could be costing you hundreds
As many as a quarter of Australians are being stung with unknown, unfair or incorrect banking fees, with the costs adding up during the COVID-19 pandemic, an expert has revealed. ...Read more
Banking
Westpac hit with biggest fine in corporate history
Australian banking and financial services giant Westpac has reached an agreement with AUSTRAC to pay $1.3 billion for breaching anti-money laundering and counter-terrorism financing laws. ...Read more
Banking
6 ways to know you need a new bank
Unhappy with your current bank? Here’s how to know if you need to make a change. ...Read more
Banking
The banks beating the big 4 when it comes to customer satisfaction
Midsize banks are the biggest winners in a new survey of bank customer satisfaction. ...Read more
Banking
368k Australians potentially eligible for Westpac class action: Are you one of them?
The Federal Court is set to notify 368,000 Australians that they might be eligible to join a consumer credit class action against the big four bank. ...Read more
Banking
Government introduces royal commission laws
The government is striving to implement a number of the royal commission recommendations in a package that was recently introduced to Parliament. ...Read more
Banking
ANZ cops $10m penalty for wrongful fees
The Federal Court of Australia has found that banking giant ANZ engaged in unconscionable conduct and breached its obligations as a financial services licensee. ...Read more
Banking
How $800m could make banking better
The federal government’s digital business plan to drive Australia’s economic recovery “will make banking faster and easier”, according to an industry group. ...Read more
Banking
How sneaky fees could be costing you hundreds
As many as a quarter of Australians are being stung with unknown, unfair or incorrect banking fees, with the costs adding up during the COVID-19 pandemic, an expert has revealed. ...Read more
Banking
Westpac hit with biggest fine in corporate history
Australian banking and financial services giant Westpac has reached an agreement with AUSTRAC to pay $1.3 billion for breaching anti-money laundering and counter-terrorism financing laws. ...Read more
Banking
6 ways to know you need a new bank
Unhappy with your current bank? Here’s how to know if you need to make a change. ...Read more
Banking
The banks beating the big 4 when it comes to customer satisfaction
Midsize banks are the biggest winners in a new survey of bank customer satisfaction. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
