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Australian retail share investors are in for a shock as dividend payouts crash

Pigs at a trough. (Photo by Ulet Ifansasti/Getty Images)

The spectacular losses posted by the big miners over the first half of this financial year have had a devastating impact on the outlook for dividends on the Australian share market.

Compared to its global peers, the ASX200 now has one of the worst outlooks for dividend payments of bourses around the world, according to research from Credit Suisse.

With dividends payouts in June are now forecast at $A73bn, compared to $A79bn over the previous 12 months, it’s bad news for anyone who has become used to steady dividend payouts as income, especially through the mining boom.

Most of the cuts are driven by the miners, with BHP and Rio Tinto leading the way. Both giants abandoned their policy of maintaining or increasing dividend payments after posting horror losses in February.

In a note to clients, Credit Suisse analysts Hasan Tevfik and Damien Boey explain the dividend per share (DPS) outlook is grim, although the earnings per share (EPS) forecasts – usually the focus of corporate reporting around the world – are a lot brighter.

The recent downgrades to Australian DPS forecasts were amongst the largest in the world, over the last month. Not even in Europe, where many are currently questioning the viability of the banking system and its ability to sustain distributions, have DPS downgrades been as great. Meanwhile EPS upgrades in Australia have been bigger than most other major markets.

Here’s a chart, showing the EPS and DPS revisions in major markets:

Source: Credit Suisse

However, almost all of this is driven by the horror show in the commodities sector:

Source: Credit Suisse

Dividend payouts in June are now expected to total $A73bn, down from $A79bn over 12 months. This, Tevfik and Boey say, “means that Australia Inc.’s progressive dividend policy, which has been in place since 2010, is now being

In a lacklustre growth environment, companies will need to continue pursuing their restructuring programs, say the analysts. “We expect companies to continue to cut costs, restrain capex, and reposition businesses,” they write.

In other words: over the coming years big corporates are likely to lay people off, delay investment, and change direction.

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