Australia's top 200 companies are set to return almost $90 billion to shareholders in 2015 in the form of dividends and share buybacks, highlighting that there is still plenty of money in the pot for income investors.
As reported by the Fairfax press, Credit Suisse predicts that a total of $80.5 billion will be distributed as dividends while $9.3 billion worth of shares will be repurchased by companies, equating to a total of $89.8 billion. That compares to the $82.5 billion returned in the year ended 31 December 2014.
The sharp increase in payouts comes at a time where businesses are becoming increasingly reluctant to spend on new capital projects. Recent data from the Australian Bureau of Statistics showed a larger-than-expected decline in business investment which fell 2.2% in the December quarter to $37.5 billion, indicating that companies are more comfortable to return cash to shareholders than to spend it themselves.
Of course, the majority of the estimated $89.8 billion will come from the nation's largest companies. In particular, that includes the big four banks, being Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd. (ASX: NAB) and Westpac Banking Corp (ASX: WBC), as well as telecommunications giant Telstra Corporation Ltd (ASX: TLS).
Combined, these five companies accounted for roughly $25 billion in dividends during the year or roughly $35 billion when you include the impact of franking credits attached to their dividends.
Here's where to get your dividends
Although they might distribute the most cash, the banks and Telstra are by no means the best stocks to gain exposure to for solid dividends. Right now, each of their shares are trading at excessive premiums to their growth potential, making them very expensive investments.
Investors should instead be looking at companies that not only offer solid dividends but also the ability to generate sufficient capital gains in the medium- to long-terms. For example, Coca-Cola Amatil Ltd (ASX: CCL) and Woolworths Limited (ASX: WOW) shares are both trading at very attractive prices while they offer yields of 3.9% and 4.8% respectively. While Coca-Cola Amatil franks its dividends to 75%, Woolworths' are fully franked, giving it a grossed up yield of 6.9%.
