Powered by momentummedia
nestegg logo
Powered by momentummedia
nestegg logo
nestegg logo

Borrow

Should the big 4 banks pay dividends during COVID-19?

By Cameron Micallef · April 14 2020
Reading:
egg

Borrow

Should the big 4 banks pay dividends during COVID-19?

By Cameron Micallef
April 14 2020
Reading:
egg
big four banks dividends

Should the big 4 banks pay dividends during COVID-19?

author image
By Cameron Micallef · April 14 2020
Reading:
egg
big four banks dividends

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. 

Advertisement
Advertisement

“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.

Should the big 4 banks pay dividends during COVID-19?
big four banks dividends
nestegg logo

Forward this article to a friend. Follow us on Linkedin. Join us on Facebook. Find us on Twitter for the latest updates
Rate the article
author image

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

Join the nestegg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

From the web

Recommended by Spike Native Network

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.