There have been warnings that dividends would have to go to Australia. The recent decision yesterday by Westpac to halt its dividend shows that the economic realities are starting to hit Australia. Australia’s S&P/ASX 200 index has consistently offered one of the greatest dividend yields in Asia and beyond, but that may be about to change if more and more corporates slash their earnings.
First cut in over 30 years
According to Refinitiv data Westpac paid an interim dividend of 94 cents last year and have paid one every 6 months for the past three decades. This was until yesterday when the board met for their Q3 meeting and decided not to pay the first half dividend for 2020. The reason given by the board was that the bank wanted to maintain a strong balance sheet amidst the ongoing uncertainty in the operating environment. This now means that the next opportunity to review the dividend will be considered as part of finalising the full year’s 2020 results. You can read Westpac’s 3Q2020 update here.
According to the Bloomberg piece reporting on Westpac’s dividend cut the outlook from analysts had been that Australia shareholder payouts could fall as much as 40% in 2020 and continue to fall in 2021 as the continued drag from COVID-19 via lockdowns and restrictions weigh on corporate earnings. This is also expected to potentially weigh on household earnings due to the large share of domestic equities in retirement and investment portfolios.
Technical level on the ASX200
Going forward, keep an eye on the 6200 level on Australia’s SPX200 for the near term battle between bulls and bears. Stay above and bulls have the momentum higher again. A move below and that signals that the bears are keeping prices capped.