Invest
Why reporting season could be a ‘dividend recession’
The COVID-19 pandemic is likely to see dividends to shareholders slashed, hurting retirees and those relying on dividend income, an investment bank states.

Why reporting season could be a ‘dividend recession’
The COVID-19 pandemic is likely to see dividends to shareholders slashed, hurting retirees and those relying on dividend income, an investment bank states.

Investment bank UBS has warned investors that the Australian market is expected to deliver a 21 per cent fall in earnings per share (EPS), the equal worst of the global financial crisis.
“One of the key negative surprises in 2020 has been the hit to dividends. Based on consensus expectations, dividends per share (DPS) across the market is expected to fall a record 39 per cent in FY20, far worse than the 20 per cent fall seen during the GFC,” the UBS report stated.
While partly driven by a fall in earnings, the significant reduction in estimated dividend payout ratios from 77 per cent in FY19 to 64 per cent in FY20 has been surprising.
“We think companies that can continue to pay, or even grow, their dividends are likely to outperform as investors seek stable sources of income. More than 35 per cent of companies reporting in Aug-20 are not expected to pay a dividend (compared to less than 10 per cent of companies that reported in Aug-19),” the UBS report said.
“However, UBS analysts still expect 30 companies to maintain or grow their DPS in Aug-20.”
This follows a financial regulator ordering the big banks to cut their dividends in response to the COVID-19 crisis.
The Australian Prudential Regulation Authority (APRA) has updated its capital management guidance for banks and insurers, in particular easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19.
APRA chair Wayne Byres previously said the updated guidance balanced the need for banks and insurers to keep supporting households and businesses, while also maintaining a prudent approach in the face of a very sharp and severe economic contraction.
“[The] announcement strikes a balance in recognising the strength of the financial system, while at the same time acknowledging the difficult path ahead,” Mr Byres said.
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