Plato Investment Management has increased its forecast for 2021 gross yield from the ASX 200 from 4.1% to 4.8% following the competition of the February reporting season.
The firm said the decision to increase it was the result of the positive company results coming out during the February reporting season where many companies paid out record dividends.
Don Hamson, managing director of Plato, said: “The February reporting season saw a number of companies declaring record dividends and what’s most encouraging is that many of those businesses that have handsomely rewarded investors, look to have strong tailwinds in the foreseeable future.
“For retirees trying to generate income, this uptick in dividends is great news. We believe diversity, active stock picking which focusses on avoiding dividend traps and tax effective portfolio management will be the keys to getting even more from dividends in the coming 12 months.”
It was particularly the case for miners with three of the top-six largest dividends coming from mining firms. Plato said it believed the mining dividends were sustainable due to the supply/demand dynamic.
“When it comes the miners, we think this is a space income investors can’t afford to ignore right now,” Hamson said.
“Of the top six dividend payers in Australia, three are now mining stocks. Are the payouts sustainable? Well, we think the supply and demand fundamentals for iron ore prices remain solid and if prices come off $100 per tonne from the highs, these companies still have good profit margins.
“Management at the big miners also seem to be learning from mistakes about over-investing in new mines which have impacted dividends in the past.”
Other strong areas included banks, where Plato’s top pick was Commonwealth Bank, which had forecast a payout ratio of 70%-80% for 2021, and JB Hi-Fi and Super Retail Group which had both seen strong sales momentum.