Australian dividend investors suffer tough quarter

Mike Taylor

Managing Editor/Publisher, Financial Newswire

17 November 2022

Investors relying on dividends have done it tough over the past quarter, according to new analysis undertaken by Janus Henderson.

According to the analysis, dividends have suffered a 13% underlying decline in total payouts this quarter, largely as a result of global sector trends.

“Australia’s headline total payouts fell by a fight year-on-year in US dollar terms, reflecting lower special dividends and weakness in the Australian dollar,” the analysis said.

The latest Janus Henderson Global Dividend Index showed that, globally, mining dividends slumped US$20.1 billion (A$30.1 billion) in Q3 as the commodity cycle rolled over and this was a major contributor to the US$7.7 billion (A$11.5 billion) decline in Australian payouts.

It noted that Australia has historically driven a large proportion of the Asia Pacific region’s Q3 performance but that in 2022 Australia lagged behind its Asian counterparts with Taiwan driving the 18.7% underlying growth in the region.

The analysis said that, previously anchored by the mining industry – which had seen record dividend levels in 2021 and the first half of 2022 – Australian dividends fell victim to an underlying lack of sector diversification. The biggest impact came from Fortescue Metals, which fell due to its significant exposure to lower metals prices, while those with large coal operations such as BHP, made smaller cuts.

However, it said Australian dividends benefited from the global improvement in trading conditions for banks as interest rates rose. Globally, bank dividends increased 8.7% on an underlying basis, and in Australia, banks made the largest contribution to dividend growth, with payouts increasing 5.8% on an underlying basis.

Commenting on the situation, Janus Henderson Australia head, Matt Gaden said the third quarter had highlighted the impact of heightened volatility and the commodity cycle across global markets.

“For Australian dividend investors, the fall in performance from mining companies and a lack of sector diversification in many portfolios meant a less stellar Q3 dividend performance,” he said.