
Most read
Pros and cons: Working in the gig economy...
Pros and cons: Working in the gig economy...

Latest Podcast
Is the market overheating; should ETFs take your fancy, and what’s happening t...
Is the market overheating; should ETFs take your fancy, and what’s happening t...

Resources
There is $17.5 billion in lost and unclaimed super across ...
There is $17.5 billion in lost and unclaimed super across ...
Invest
What to know about surviving the dividend drought
Investors who are reliant on dividends have been hardest hit during the COVID-19 pandemic, as the dividend expectations have fallen off a cliff due to an uncertain future.

What to know about surviving the dividend drought
Investors who are reliant on dividends have been hardest hit during the COVID-19 pandemic, as the dividend expectations have fallen off a cliff due to an uncertain future.

A paper penned by Nikko’s portfolio manager and senior analyst, Malcolm Whitten, showed that despite the ASX 200 falling by 30 per cent investors in oil and banks, dividends expectations are down 66.8 per cent and 46.6 per cent, respectively.
With many older Australians and SMSFs having a larger proportion of assets in banking and mining shares, it has left many without a stream of income.
The most robust dividend segment has been industrial ex-banks, which is still seeing an 18.3 per cent decline.
“All dividend distributions are at the discretion of company boards. An ‘abundance of caution’ has been behind most decisions to deny, defer or diminish dividends by proportions greater than the effect justified by the earnings decline.
“While the uncertainty regarding the bank dividends is disconcerting, in the circumstances, the consensus expectations imply that investors are prepared for a six-month dividend suspension before the restart of the economy takes shape and boards regain confidence reinstate deferred dividends,” Mr Whitten said.
Looking forward, the paper has found that dividend yield of 4.6 per cent has now been revised to 3.5 per cent.
“This dividend per share drought is a direct consequence of the impact on earnings and business confidence. The dividend yield convergence is a result of extreme unconventional monetary policy, which has crushed yields in traditional competing yield financial assets,” Mr Whitten explained.
However, in good news for investors relying on dividend yields, Mr Whitten predicts that the dividend drought will break shortly after the COVID-19 pandemic ends.
“There are few companies that benefit relatively or suffer less from the current events. We note the valuation distortions that will be the source of funding for those companies we are prepared to back to make it to the other side.
“The COVID-19 episode will pass and the dividend drought will break as activity and confidence return. Malcolm and the team remain confident that the rolling five-year income objective of a grossed-up dividend yield greater than the S&P/ASX 200 yield with long-term capital growth will be met,” Mr Whitten concluded.
About the author

About the author


Stock market
Ethical investing tipped to drive ETF market
Following a volatile 2020 where investors poured into ETFs, shareholders are tipped to focus on ethical investing and technology as the recovery from the COVID-19 pandemic continues, an industry expe...Read more

Stock market
‘The concept of collective investing is here to stay’
The phenomenon of retail investors acting as a collective, led by social media and celebrity investors, is here to stay, says one expert. ...Read more

Stock market
What is short selling and should you do it?
Short selling stocks may sound like a good investment strategy when you’re after quick and big returns, but is it worth the risk? Here’s a rundown of why shorting stocks may not be a sound stock t...Read more

Stock market
How much insider trading really happens?
There are at least four times as many people who get away with insider trading than the number of those caught by prosecutors, new research has revealed. ...Read more

Stock market
Why you should be wary of the tech stock bandwagon
After a strong year of tech stock gains, tech shares have been on a decline in recent weeks as increasing bond yields rattle equity markets. ...Read more

Stock market
GameStop set to release first earnings since Reddit stock market rally
The video game retailer at the centre of the WallStreetBets saga is set to post its first quarterly market update since the fiasco began, with social-media investors heavily tipped to continue backing...Read more

Stock market
What is thematic investing and why it could be a fad
Long-term investors are being urged to ignore market fads and instead focus on identifying major socioeconomic, environmental and technological themes, an industry expert has explained. ...Read more

Stock market
ASX 300 companies cash in on JobKeeper scheme
Most of Australia’s ASX 300 companies that received JobKeeper payments did not need the subsidy as they recorded increases in profits throughout the calendar year, according to a study. ...Read more

Is the market overheating; should ETFs take your fancy, and what’s happening to the low and middle income tax offset?
Listen now

Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now

Raging floods, the tech stock bubble and the ongoing SG debate
Listen now

Meet the Manager with Trilogy’s Philip Ryan: RBA rates and property price growth
Listen now

Stock market
Ethical investing tipped to drive ETF market
Following a volatile 2020 where investors poured into ETFs, shareholders are tipped to focus on ethical investing and technology as the recovery from the COVID-19 pandemic continues, an industry expe...Read more

Stock market
‘The concept of collective investing is here to stay’
The phenomenon of retail investors acting as a collective, led by social media and celebrity investors, is here to stay, says one expert. ...Read more

Stock market
What is short selling and should you do it?
Short selling stocks may sound like a good investment strategy when you’re after quick and big returns, but is it worth the risk? Here’s a rundown of why shorting stocks may not be a sound stock t...Read more

Stock market
How much insider trading really happens?
There are at least four times as many people who get away with insider trading than the number of those caught by prosecutors, new research has revealed. ...Read more

Stock market
Why you should be wary of the tech stock bandwagon
After a strong year of tech stock gains, tech shares have been on a decline in recent weeks as increasing bond yields rattle equity markets. ...Read more

Stock market
GameStop set to release first earnings since Reddit stock market rally
The video game retailer at the centre of the WallStreetBets saga is set to post its first quarterly market update since the fiasco began, with social-media investors heavily tipped to continue backing...Read more

Stock market
What is thematic investing and why it could be a fad
Long-term investors are being urged to ignore market fads and instead focus on identifying major socioeconomic, environmental and technological themes, an industry expert has explained. ...Read more

Stock market
ASX 300 companies cash in on JobKeeper scheme
Most of Australia’s ASX 300 companies that received JobKeeper payments did not need the subsidy as they recorded increases in profits throughout the calendar year, according to a study. ...Read more