Australian dividends saw the lowest quarter in more than a decade with underlying dividends falling to $13.4 billion in the third quarter of 2020.
According to the latest Janus Henderson Global Dividend report, dividends fell 40.3% on an underlying basis with the largest impact coming from banks.
This was among the weakest countries worldwide, alongside the UK (-41.6%) and the Netherlands (-44.8%).
Janus Henderson highlighted the reliance on banks had “long been a source of major risk” for Australian dividends as they accounted for half of all dividends. The biggest cuts from Commonwealth Bank, NAB and ANZ with the three firms accounting for three-fifths of the total $12.3 billion fall.
There were no Australian companies among the top 20 largest dividend payers this quarter compared to three companies- BHP, CBA and NAB- in the same period a year ago.
Australian dividends versus rest of the world ($AUD)
Source: Janus Henderson
Other firms which suffered included Insurance Australia Group, Sydney Airport and Aristocrat Leisure while Coles and Newcrest Mining were the only two Australian companies to raise their dividends year-on-year.
Shares in Coles rose 19% thanks to increased consumer spending on groceries while Newcrest Mining had been helped by the rising price of gold, although its share price was down 4.8% since the start of the year.
According to FE Analytics, the only fund within the Australian Core Strategies universe which held both of these stocks in its top 10 holdings was the Milford Australian Absolute Growth fund.
Matt Gaden, head of Australia at Janus Henderson, said dividends would continue to be affected until the second quarter of 2021.
“In 2021, Q1 will still be affected by reductions by then things should pick up. The big question mark is over decisions the regulators in the UK, Europe and Australia will make around banking payouts. And of course, so much depends on the pandemic and the severity and duration of any further lockdowns. As a rough guide, we estimate a worst case for dividends to be flat next on an underlying basis but we believe they could rebound by 12% in our best-case scenario,” he said.
Dividends in the Asia-Pacific region, excluding Australia, were flat during the quarter thanks to the performance of countries where there had only been a minimal impact from the COVID-19 pandemic.