Stable Australian equity dividends expected in FY2023–24: Ausbil

Ausbil australian equities dividends franking credits

3 July 2023
| By Rhea Nath |
image
image
expand image

Despite market volatility, dividend yield outlook for financial year 2023 sits at around 4.4 per cent for the ASX 200, in line with the long-term trend of around 4.5 per cent a year excluding the benefit of franking credits, according to Ausbil.

Forecasts for FY2024-25 dividends for the asset class also look to be 4.4 per cent. 

“When adjusted for franking credits (remembering that a dollar of franking credit is worth the same as a dollar of cash dividend to all Australian tax payers) the gross dividend yield rises to around 6 per cent a year,” explains Michael Price, portfolio manager of the Ausbil Active Dividend Income Fund. 

He highlights the current three-year bank term deposit paying monthly is also around 4 per cent before tax.

Looking at sectors, biotechnology, and pharmaceuticals and software are offering low yield but higher dividend growth. In comparison, gold is looking at dividend contraction in 2024 while offering a low yield and consensus expects banks to resurge again. 

“To make the most of what is on offer, it is possible to blend the benefits of higher yielding companies with those whose dividends may be lower but contain higher levels of growth through the construction of an active dividend income portfolio,” Price said. 

He noted numerous reasons as to how an active portfolio approach to generate income can be possible. 

“The first is that dividends are not just paid twice yearly, but there are dividend payments in almost all months,” he said. 

“Through the activity of dividend rotation, which means pro-actively purchasing into stocks to receive their dividends, an active dividend income strategy can generate dividend income for investors each month. 

“A simple ‘buy and hold’ strategy cannot maximise the spread of dividends and franking credits on offer across the calendar year. An active dividend strategy can find more dividends and more franking credits for investors across the year through dividend capture.”

Price continued: “Secondly, good dividend payers today may not be the good dividend payers in the future. For example, while banks dominated resources in the payment of dividends in 2019 and 2020, this began to swing in favour of resources in 2021, 2022 and 2023.”

The portfolio manager warns that high-yielding stocks may not be investing in future dividend growth, which means their future income streams could come from a declining business even as they pay out large amounts. 

“The balance between yield and dividend growth is therefore crucial in generating more sustainable long-term income and total returns, comprising both growth and income,” Price said. 
 

Read more about:

AUTHOR

Add new comment

The content of this field is kept private and will not be shown publicly.

Recommended for you

 
sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

 

MARKET INSIGHTS

Old Fella

Of course a survey commissioned by an adviser coaching business would find that having an external business coach is a k...

14 hours ago
One foot out the door

A financial planner is expected to earn between $95,000 and $120,000 per year, depending on the state. Really? I don't...

1 day ago
JOHN GILLIES

The whole thing is a bit frightening especially the last note where notes on what might be done could result in the need...

1 day 20 hours ago

ASIC has cancelled the AFS licence of a Sydney wealth firm, the fifth Sydney firm to see a cancellation since the start of the year....

1 week 6 days ago

A former financial adviser has been banned by ASIC from providing financial services for inappropriate advice, among multiple breaches....

4 weeks ago

More than 20 winners from the funds management industry have been crowned at this year’s awards....

6 days 22 hours ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND