Why do Australian stocks provide higher dividends compared to rest of the world?

helpme · 21 February 2016

In comparison to other countries stock markets, say U.S, Australian stocks provide much more attractive dividends. This is so even for stocks with relatively high PE ratios (>18). This is just an observation. Do you share this observation. Any reason why this generosity among Aussie stocks? Are there more retirees in Australia that desire income dividends more than other countries?

systematic · 21 February 2016

helpme said:
In comparison to other countries stock markets, say U.S, Australian stocks provide much more attractive dividends. This is so even for stocks with relatively high PE ratios (>18). This is just an observation. Do you share this observation. Any reason why this generosity among Aussie stocks? Are there more retirees in Australia that desire income dividends more than other countries?

Dividend imputation.

This is a nice, brief paper

Hope this helps...

luutzu · 21 February 2016

helpme said:
In comparison to other countries stock markets, say U.S, Australian stocks provide much more attractive dividends. This is so even for stocks with relatively high PE ratios (>18). This is just an observation. Do you share this observation. Any reason why this generosity among Aussie stocks? Are there more retirees in Australia that desire income dividends more than other countries?

Could be because Australian companies just don't know what else to do with the money

That or they do generally poorly they have to make up for it in dividends.

Or they're doing very well and so higher dividends is still conservative.

Depends.

bookcooker · 22 February 2016

I think dividend imputation system has definitely made dividends more attractive hence companies are more inclined to issue more dividends which leads to higher yields. I am sure the data also supports this. As soon as the dividend imputation system was implemented a spike in the amount of dividends occurred.

Mofra · 22 February 2016

One other contributing factor is our RBA rate is higher than other countries with influential world indices, as their reserve banking equivalents often are close to zero (post-GFC) and sometimes even below zero (in risk-free ROR terms).

There is an inverse relationship between the risk-free ROR and average dividend levels in a domestic market and with a higher relative interest rate in Australia listed companies are competing for capital in a higher interest rate environment, hence the higher payout ratios

helpme · 23 February 2016

I am wondering if this generous dividends policy has stunted the growth of Australian companies? Any studies done on this aspect? What are the observations of experienced investors here?

Nevertheless, I have always favored high-yield companies. It shows they are confident of generating cashflow to pay their shareholders.

So_Cynical · 23 February 2016

helpme said:
I am wondering if this generous dividends policy has stunted the growth of Australian companies? Any studies done on this aspect? What are the observations of experienced investors here?

STW - ASX200 (Aust) tracking fund dividend yield 5.15%

https://www.spdrs.com.au/etf/fund/fund_detail_STW.html

---------------------------

SPY - SPDR S&P 500 (US) tracking fund dividend yield 2.19%

https://www.spdrs.com/product/fund.seam?ticker=SPY

---------------------------

Aussie stocks pay better dividends, isn't it great.

Bill M · 23 February 2016

Also if you have a Superannuation Account in Pension mode there is no tax on earnings. That means, not only do you get the dividends announced , you also get all the franking credits paid into your account too. Bloody good country this Australia

ThierryHenry · 25 February 2016

The imputation system encourages Australian share ownership, so corporations need to keep meeting the demand for high yield, especially in this low interest rate environment. Other nations dont have our tax friendly dividend system, so investors dont demand high yield for share ownership.

Anyways, most subscribe to the DDRP, so the dividends on profits get reinvested back into the corporation.

The only ones missing out, is the taxman.

McLovin · 25 February 2016

Hmm..A lot of new posters.

Zaxon · 19 June 2018

We don't have the amazing growth companies such as Google, Berkshire etc, so you need to go international for that. The silver lining is that if you're a dividend investor, there's probably no other market you'd rather be in.

Value Collector · 19 June 2018

Zaxon said:
We don't have the amazing growth companies such as Google, Berkshire etc, so you need to go international for that. The silver lining is that if you're a dividend investor, there's probably no other market you'd rather be in.

It's mainly the Tax implications. Companies like Berkshire say straight out that they don't pay a dividend because of the tax that the share holders would pay on that dividend, it is better for them to retain the $1 and reinvest it than pay it to the share holder who only gets $0.85 cents after tax to reinvest.

in Australia due to franking credits, the disincentive to pay dividends doesn't really exist so much.

Zaxon · 19 June 2018

Value Collector said:
It's mainly the Tax implications. Companies like Berkshire say straight out that they don't pay a dividend because of the tax that the share holders would pay on that dividend, it is better for them to retain the $1 and reinvest it than pay it to the share holder who only gets $0.85 cents after tax to reinvest.

in Australia due to franking credits, the disincentive to pay dividends doesn't really exist so much.

Specifically with Berkshire, they have so much cash on hand and few opportunities to use it, due to their massive size. While it made sense for them to retain their cash 20 years ago, that cash is now earning bond rates. I wonder if it would benefit shareholders more if it were returned to them these days.

Value Collector · 19 June 2018

Zaxon said:
Specifically with Berkshire, they have so much cash on hand and few opportunities to use it, due to their massive size. While it made sense for them to retain their cash 20 years ago, that cash is now earning bond rates. I wonder if it would benefit shareholders more if it were returned to them these days.

Probably better to earn 1%, while we wait for opportunities to come than to lose 15% to tax the moment the check clears.

The market can turn in a short period and suddenly, you can find plenty of opportunities start arriving thick and fast.

Warren has already said the we would buy back stock (within certain price limits) before he considered dividend.

Why do Australian stocks provide higher dividends compared to rest of the world?

helpme

systematic

luutzu

bookcooker

Mofra

helpme

So_Cynical

The Contrarian Averager

Bill M

Self Funded Retiree

ThierryHenry

McLovin

Zaxon

The voice of reason

Value Collector

Have courage, and be kind.

Zaxon

The voice of reason

Value Collector

Have courage, and be kind.

Similar threads

Why do Australian stocks provide higher dividends compared to rest of the world?

The Contrarian Averager

Self Funded Retiree

The voice of reason

Have courage, and be kind.

The voice of reason

Have courage, and be kind.

Similar threads

Privacy & Transparency

Privacy & Transparency