Results from Australian companies for the first half of 2021 are the strongest for several years, surpassing analyst expectations but it will take time for them to return to pre-COVID levels.
In an interview with Money Management, AMP portfolio manager, Dermot Ryan, said retailers and miners had been the stand-out sectors.
“This is the strongest reporting season for a number of years based on dividends and earnings, it was a record level of dividends and the highest half-year dividends ever in retail and mining so we are seeing strong revenue trends and firms are coming back stronger than ever.
“Dividends for Commonwealth Bank and Bendigo & Adelaide Bank were 75% of what they were last February which is a good result and stronger than expectations, but it might be a while until we get back to pre-COVID levels.”
He said the decision by the Australian Prudential Regulation Authority (APRA) to restrict banking dividends had been “prudent”. However, the market would be watching how it monitored the distribution of capital now the restrictions had been lifted.
“APRA were very prudent and it was the right thing to do at the time. The market will now be watching how APRA monitors releases the brakes that it put in place,” Ryan said.
In its Australian equity portfolios, Ryan said AMP had been moving away from defensive sectors towards those which were able to increase their dividend over time. This included miners, retailers and industrials while he was underweight insurers and electricity utilities.
“Australia is six, even nine months, ahead of the global recovery so we are positive on the cycle and the opportunity for domestic investors in Australia,” he said.
