Cash splash: Another $6b to line investor pockets

Six of the major businesses reporting this week plan to pay out a total $6.3 billion in dividends. Photo: Peter BraigCompanies are continuing to line investor pockets with cash returns this reporting season, with more than $6 billion in dividends paid this week.

Wesfarmers, BHP, Fortescue, Suncorp, Woodside and Seek are amongst the group of corporates splashing cash on investors.

Fortescue surprised investors on Wednesday, when it announced a total dividend payout of $US292 million ($324.41 million), of which close to $103 million with be paid to its biggest shareholder and company chairman Andrew ‘Twiggy’ Forrest.

Combined, six of the major businesses reporting this week plan to pay out $6.3 billion in dividends, a sign of confidence in their own businesses, and the Australian economy.

In the case of Woodside and Suncorp, dividends were increased, despite profits falling.

Forecasts have varied and there is still some worry surrounding Australia’s transition away from the mining economy, but payout ratios continue around record highs.

The 10-year average S&P/ASX 200 payout ratio is about 60 per cent but has been as low as 52.2 per cent – the payout in 2007 – Perpetual’s figures show.

Healthy dividends are popular with Australian investors and companies, despite cut-backs, have been keen to keep investors happy with solid and growing returns.

Consumer spending is slowly returning and the aggressive cost-cutting has allowed the flow of dividends to keeping pushing through.

Stronger balance sheets, repositioned asset portfolios and underlying profitability have given businesses the confidence to pay out increased dividends, Morgan Stanley head of investment strategy Malcolm Wood said.

”It is a vote of confidence in the future, of course. Companies don’t like mucking around with their dividends too often and the market still offers a very attractive dividend yield, vis-a-vis alternative assets,” Mr Wood said.

”I guess that management and boards are saying they’re fairly comfortable with the outlook.”

The yield theme has been prominent for the Australian market in recent years.

Falling bond yields, short and long term rate cuts, and less appealing term deposits have sent investors looking for a more profitable use of their money.

So far this earnings season, things have looked positive.

Of the 30 per cent of companies that have reported, more than half have beat net profit expectations, Deutsche Bank strategist Tim Baker said.

“The change to earnings is more modest (+1-1.5 per cent for financial years 2014 and 2015), but still positive. And this should be viewed against the backdrop of only very mild earnings downgrades coming into results, making the hurdle of beating expectations higher,” Mr Baker said.