Welcome to Tuesday. Here are the five things I'm looking at today on the Australian sharemarket.
- The S&P/ ASX 200 (Index: ^AXJO) (ASX: XJO) has opened up 0.2%, despite mixed results on Wall Street overnight. The Dow Jones Industrial Average lost 0.1%, while the S&P 500 was flat and the tech-heavy NASDAQ gained 0.2%.Since October 13, the index has rocketed up 6.1%, following a near 10% fall, and year-to-date the index has gained 2.8% (excluding dividends), or 6.4%, including dividends.
That highlights the importance of dividends during periods of low capital return, and it's one reason many Australian investors have cottoned on to big dividend-paying stocks. Add in the franking credits and the returns for shareholders absolutely smashes the return available on term deposits.
- Westpac Banking Corporation (ASX: WBC) boss Gail Kelly says shareholders face dividend cuts if the big four banks are required to hold extra equity capital. David Murray's financial system inquiry is widely expected to force the big four banks to hold additional capital, because of their 'too big to fail' status, and risks they could cause to the financial system should one of them go under.Ms Kelly says the banks could pass on the costs in a number of ways, including increasing variable mortgage rates, cutting deposit rates or reducing dividends. But the first two appear unlikely given the banks are desperate to maintain their dominance of the market for mortgages and deposits, and those moves would give their smaller competitors a leg up.
The final report is expected to be released at the end of November.
- And for a change of tack (or track if you prefer), it's the first Tuesday of November, and that means just one thing – it's Melbourne Cup day. For Victorians, it's a public holiday, while the rest of Australia will have to put up with working – apart from the 3 or so minutes when the 'Race that Stops a Nation' kicks off.
If you're looking for some hot tips, The Motley Fool Australia's own tipper Lewy offers his selection here.
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