Last year was one to forget if you’re an income investor, with some of Australia’s most reliable dividend-paying stocks producing dismal payouts or just scrapping them all together.
Australia’s Big Four banks were no exception to this trend, forced to slash their dividends to keep their Common Equity Tier 1 at APRA-mandated levels.
Westpac Banking Corporation [ASX:WBC] was arguably the most disappointing of the banks, cutting its dividend from $1.74 per share in 2019 to just 31 cents in 2020.
The embattled bank also forwent paying its interim dividend.
National Australia Bank Ltd [ASX:NAB] and Australia and New Zealand Banking Group Ltd [ASX:ANZ] fared a little better.
NAB’s typical dividend of $1.98 per share declined slightly in 2019 to $1.66 and was cut to just 60 cents per share in 2020.
ANZ is mostly similar, slashing its divided from $1.60 to 60 cents in 2020.
Commonwealth Bank of Australia [ASX:CBA] managed to keep the title of biggest dividend, still paying out a decent $2.98 per share.
Though this is still a far cry from the $4.31 per share it had paid out in the prior two years.
Is the bank dividend drought over?
Investors can only hope 2021 treats their dividends more kindly than 2020 did.
Indeed, there are signs they could be expecting dividends to return this year.
The recovery of three of the Australian big four banks, excluding WBC, could mean investors are buying back into the big payers.
ANZ, CBA, and NAB aren’t too far off their pre-crash levels.
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Duncan Hogg, a partner in EY’s merger and acquisitions division, says a dividend revival could be imminent this year.
‘The next 12 months is expected to see a return of the two largest sectors, with the market expecting both property and financials to outperform the other large dividend payers.
‘Given record low interest rates, continued market stimulus and excess liquidity, we would expect the strong dividend payers to achieve reasonable share price accretion as investors chase yields.’
So, what does this mean for the Big Four banks?
Increased borrowing by home buyers and small business, lower bad debt charges, and the APRA loosening up dividend controls all paint a rosy outlook for payments by the banks.
How much will the big four banks boost their dividends?
In my opinion, it would be surprising to see the Big Four banks move back to their pre-COVID payout levels this year.
But by all expectations, the banks could beat out last year’s dividends comfortably.
However, with more and more competition moving into Australia’s financial sector, we could be seeing the end of the Big Four banks’ run as the dividend heroes.
In fact, there was a host of stocks that were able to maintain a healthy dividend throughout the pandemic. In one of his latest reports, Rum Rebellion editor Greg Canavan reveals his five Aussie superstars paying top dividends and set to thrive in the post-pandemic era. Claim your free report now.
For The Rum Rebellion