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Bank dividends to boost market

Despite expectations of an IPO-fuelled ‘Santa rally’, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has experienced its weakest start to December in nearly 40 years having plunged 4.4% in that time. However, the dividends to be paid by three of Australia’s big four banks this week could spur a pre-Christmas recovery with Goldman Sachs broker Richard Coppleson expecting nearly $8.4 billion to be returned to investors by 19 December.

Whilst over $540 million was returned to investors last week through the dividend distributions of investment bank Macquarie Group (ASX: MQG) ($340 million) on Thursday and chemicals and explosives manufacturer Orica (ASX: ORI) ($202.5 million) on Friday, it is the banks’ dividends that will count the most.

Paying 91c per share, ANZ (ASX: ANZ) distributed nearly $2.5 billion worth of dividends on Monday, whilst NAB (ASX: NAB) will distribute almost $2.3 billion on Wednesday through its 97c per share dividend. Thursday will also see Westpac (ASX: WBC) distribute over $2.7 billion through its 88c per share dividend, plus a further $310 million from its 10c per share special dividend payment.

Meanwhile, shareholders of BT Investment (ASX: BTT) will also receive an additional $27.9 million on Thursday following its 10c per share dividend.

Combined, Coppleson has forecast a return of $8.39 billion worth of dividends. He said: “Assuming a 25 per cent dividend reinvestment plan, the cash that will come back in to the market is about $6.85 billion… Throw that in with $2 billion of monthly inflows, then we see about $8.85 billion of cash coming into a ‘thin’ market.”

Foolish takeaway

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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