Plato Investment Management expects a relatively bullish outlook in 2021 for yield from Australian equities and select domestically focused retailers.
Another sector with exceptional yields in 2021 would be iron ore miners as COVID-19 economic stimulus across the globe would continue to evolve from income support to infrastructure spending, led by China, providing a strong tailwind for demand.
“There is some concern about the impact of trade wars, but the reality is Chinese steel mills have few options outside of Australia. Brazil being the other major Iron Ore exporter, but all the data indicates Brazil alone can’t provide China with what they need,” managing director of Plato Investment Management, Don Hamson, said.
“China is hitting the exports it can get from other countries, like beef, barley, wine and now it seems coal.
“Our picks for dividends in 2021 in this space continue to be Fortescue, BHP and Rio Tinto.”
As far as retail sector was concerned, Plato said it expected expect good yields from the likes of Wesfarmers, Coles, Super Retail and JB Hi-Fi in the year ahead.
“You can’t travel abroad, so if you think about the number of additional Australians who’ll be spending the holiday season at home, buying groceries from supermarkets, buying gifts and taking advantage of post-Christmas sales, we think this is significant. It bodes well for continuing strength from consumer staples stocks and select consumer discretionary,” Hamson said.
At the same time, he said: “We’ve been underweight banks for most of the year but have become much more optimistic on banks dividends in recent months.
“We don’t expect bank dividends to go back to where they were two years ago, but we’re confident they will increase in 2021 and begin moving back towards normal payout ratios of between 70-90%.”