About $25 billion, or about 1.5% of the Gross Domestic Product, will be paid out by Australian companies in dividends over the next two months.
The flood of cash to shareholders is a concrete example of the current general policy by Australian companies to keep dividends high, even when sales growth is slipping.
According to analysis by CommSec, most companies reporting half-year earnings results (86%) chose to pay a dividend and three-quarters of these lifted or maintained dividends.
And they did this after a merely okay reporting season. Profits rose modestly and cash holding levels eased.
In aggregate, revenue grew by 0.2% to $298.2 billion while expenses grew by 3.3% to $241.4 billion, leading to a 26.2% fall in net profit to $25.7 billion.
Essentially companies, in aggregate, are paying out most of their half-year profits.
In general, most years Australian companies as a group pay out about two-thirds of earnings as dividends. This is about double the dividend payout ratio of US businesses.
As the chart shows, in the week to April 3, almost $10.8 billion will be paid out.
CommSec estimates almost $24.7 billion will be paid to shareholders from early March to late May. Here’s the breakdown:
- Over the three weeks to April 14, almost $20.8 billion will be paid out
- In the week to March 27, dividends totaling $4.8 billion
- In the week to April 3, $10.75 billion will be paid out; and
- In the week to April 10 dividend payments of almost $5.2 billion will be made.
Cash holdings reported by all ASX 200 companies that issued earnings statements to December fell by around 2% over the year to $105 billion.
As has been the case for more than a year now, companies remain active in using high cash levels to lift or maintain dividends.
In aggregate, dividends rose by 2.2% despite variable profits and lower cash reserves.
And 86% of all companies chose to pay a dividend, down from 89% in the last reporting period but above the long-term average of 83.7%.
Of all companies issuing a dividend, 68% lifted dividends, 24% maintained dividends and just 8% cut dividends.