Many Australian investors focused on falling share prices last year and did not quite notice that total dividends climbed by almost eight per cent in dollar terms from 2017, according to Plato Investment Management, which saw a record year for income distributions for its Australian Shares Income Fund.
The company’s research found that dividends grew both in Australia and globally, with global dividends paid by developed market companies rising 12 per cent year-on-year in 2018.
Plato’s managing director, Don Hamson, attributed this growth to strong dividend increases for the market as a whole, and in particular to large share buybacks by Rio Tinto and BHP.
“The almost eight per cent increase in market-wide dividends was particularly encouraging given the traditional income stocks – the big four banks and Telstra – broadly maintained, or in Telstra’s case cut, their dividends in 2018,” he said.
The expectations for the financial year 2018/19 would be even higher, with 14 per cent for Plato’s fund, given BHP would pay a large special dividend and the potential for further buy-backs from the likes of Woolworths.
“To that end, we would encourage companies with excess franking account balances to consider increasing franked dividends or undertaking tax-effective buy-backs before the end of the financial year.”
At the same time, investors were advised to monitor the Labor Party franking credit tax refund issue.
Plato also urged dividend income investors, including retirees and self-managed super funds (SMSFs), to look for sources of income beyond Telstra and the big four banks.
“Investors should be wary of this concentration as there are many other good companies that offer both consistent dividend income and better potential for capital growth in Australia and globally,” Hamson advised.