Australian dividends fell by almost half (49.8%) to $US2.8 billion ($A3.8 billion) in the March quarter, a slide exaggerated by resources companies cutting payouts to shareholders to match shrinking commodity earnings.
In underlying terms, Australian dividends dropped 29.7%, thanks mainly to BHP Billiton’s steep cut, according to the Henderson Global Dividend Index.
The first quarter is the smallest dividends quarter for Australian companies, most of which make payments in the second half of the year, but it is taste of what is to come.
“Australian investors are heavily dependent on banks and commodity companies, which together make up over two thirds of the country’s equity income,” says Alex Crooke, head of global equity income at Henderson Global Investors.
The downturn in the mining sector is hitting shareholder income hard. Henderson estimates oil and mining company cuts will knock 12% or $US5.5 billion ($A7.5 billion) from Australia’s total this year.
Rio Tinto started the slide in changing dividend policy to reflect a low price commodity world.
In February, the miner dropped its progressive dividend policy. Instead, it will set a rate at the end each financial period taking into account the results for the financial year, the outlook for major commodities, the long-term growth prospects of the business and the company’s objective of maintaining a strong balance sheet.
And BHP in February posted a massive half year loss of $US5.669 billion ($A7.8 billion), the big miner’s first in 16 years, and cut its dividend by more than half.
The world’s biggest mining company then also abandoned its progressive policy of keeping payouts the same or higher.
The new dividend policy is to pay a minimum 50% of underlying attributable profit, more closely linking returns to shareholders to the cyclical performance of the business.
“Along with deep cuts from the oil sector, sharply lower payouts from BHP and Rio are likely to wipe out dividend growth from Australia altogether this year,” says Crooke.
“The remaining quarters will look better than Q1, but the outlook is gloomy. It’s times like these that demonstrate the risks of such a heavy reliance on one or two sectors.”
There’s better news offshore. Global dividends rose 2.2% to $US218.4 billion ($A301 billion) in the three months to March.
Henderson expects global dividends of $US1.18 trillion ($A1.6 trillion) in 2016, up 3.9%.