Invest
Dividends slashed to 5 per cent, fund manager advises
As the bear market continues, investors are being reminded that, historically, dividends are less volatile than share prices, with returns predicted to be significantly higher than cash, a fund manager has highlighted.
Dividends slashed to 5 per cent, fund manager advises
As the bear market continues, investors are being reminded that, historically, dividends are less volatile than share prices, with returns predicted to be significantly higher than cash, a fund manager has highlighted.
According to Dr Don Hamson, managing director at Plato Investment Management, while some sectors have been completely closed off, investors should still see solid dividend returns.
“While various unknowns remain in this rapidly evolving environment, our current expectation when taking into account all the information currently available on the COVID-19 pandemic is an overall 30 per cent dividend cut across Australian equities over the next 12 months, based on information available at 31 March 2020,” Dr Hamson explained.
Dr Hamson believes when adjusting for likely dividend cuts, Australian investors should expect a gross yield including franking from Australian equities over the next 12 months of around 5 per cent, which is still 3 per cent higher than a savings account.
Instead of being marketwide, the dividend cuts will be very stock- and sector-specific, and dividend traps are about to become a lot more prevalent.
“We believe iron ore miners are at the lower end of the dividend cut risk spectrum. Expected stimulus from China will require iron ore, and there’s been supply issues in India and Africa, which have supported prices.”
“Telcos and consumer staples should also be able to avoid major dividend cuts.
“Significant dividend cuts are likely from the banking sector, and it is our belief that smaller banks will be hurt more than larger banks, due to thinner margins and narrower funding avenues.
“We also expect dividends from miners without exposure to iron ore to be hit, along with the consumer discretionary, energy and REITs sectors, particularly retail REITs,” Dr Hamson concluded.
RELATED ARTICLES
About the author
About the author
Stock market
International stocks: Diversifying your portfolio beyond Australia
In an increasingly globalized market, Australian investors have the opportunity to enhance their investment portfolio by incorporating international stocks. Diversifying your investments globally can ...Read more
Stock market
Stock market rally likely to continue regardless of Fed minutes tone, says deVere CEO
The bull run that has propelled Wall Street's major indexes to record highs this month is expected to continue regardless of the tone of the upcoming Federal Reserve minutes, according to Nigel Green, ...Read more
Stock market
US stock rally driven more by valuation growth than earnings, leaving tech names vulnerable: Innova
The strong gains in US stocks over the past year, particularly in the technology sector, have been driven more by expanding valuations than underlying earnings growth, leaving them exposed to a ...Read more
Stock market
Sun Silver to make its ASX debut with a $13 million IPO
Sun Silver Limited (proposed ASX Code: "SS1") has announced the opening of its Initial Public Offering (IPO) today, aiming to raise a minimum of $10 million and a maximum of $13 million (before costs)Read more
Stock market
Nasdaq hits record high, underscores the value of tech in investment portfolios
The Nasdaq Composite's surge to an all-time high last Friday highlights the importance of incorporating technology into investment strategies. Read more
Stock market
Apple sets an unprecedented profit pace within the GAFAM group in 2023
After navigating through the economic difficulties presented in 2022, the technology sector has demonstrated resilience and growth, with many companies seeing increases in revenue and stock value. Read more
Stock market
Fintech startup okoora unlocks over $3 billion in forex savings for businesses
Fintech innovator okoora has announced it has saved customers a monumental amount over $3 billion through international foreign exchange transactions. Read more
Stock market
Google's Gemini edges out ChatGPT4 in groundbreaking AI showdown
Google's latest AI model, Gemini, has edged out OpenAI's ChatGPT4 in a recent set of rigorous multi-discipline tests, marking a significant milestone in the large language model (LLM) sector. Read more
Stock market
International stocks: Diversifying your portfolio beyond Australia
In an increasingly globalized market, Australian investors have the opportunity to enhance their investment portfolio by incorporating international stocks. Diversifying your investments globally can ...Read more
Stock market
Stock market rally likely to continue regardless of Fed minutes tone, says deVere CEO
The bull run that has propelled Wall Street's major indexes to record highs this month is expected to continue regardless of the tone of the upcoming Federal Reserve minutes, according to Nigel Green, ...Read more
Stock market
US stock rally driven more by valuation growth than earnings, leaving tech names vulnerable: Innova
The strong gains in US stocks over the past year, particularly in the technology sector, have been driven more by expanding valuations than underlying earnings growth, leaving them exposed to a ...Read more
Stock market
Sun Silver to make its ASX debut with a $13 million IPO
Sun Silver Limited (proposed ASX Code: "SS1") has announced the opening of its Initial Public Offering (IPO) today, aiming to raise a minimum of $10 million and a maximum of $13 million (before costs)Read more
Stock market
Nasdaq hits record high, underscores the value of tech in investment portfolios
The Nasdaq Composite's surge to an all-time high last Friday highlights the importance of incorporating technology into investment strategies. Read more
Stock market
Apple sets an unprecedented profit pace within the GAFAM group in 2023
After navigating through the economic difficulties presented in 2022, the technology sector has demonstrated resilience and growth, with many companies seeing increases in revenue and stock value. Read more
Stock market
Fintech startup okoora unlocks over $3 billion in forex savings for businesses
Fintech innovator okoora has announced it has saved customers a monumental amount over $3 billion through international foreign exchange transactions. Read more
Stock market
Google's Gemini edges out ChatGPT4 in groundbreaking AI showdown
Google's latest AI model, Gemini, has edged out OpenAI's ChatGPT4 in a recent set of rigorous multi-discipline tests, marking a significant milestone in the large language model (LLM) sector. Read more
