The ASX dividend party’s here: how to get yours

Income investors rejoiced in the first quarter of 2021. There’s more to come for the rest of this year, but where do we find the yield?

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A global investment house has suggested dividends on the ASX are about to explode.

The latest Janus Henderson Global Dividend Index predicted dividends in Australia would grow 40% this year.

This would come on the back of an excellent first quarter and industries benefiting from the post-COVID recovery.

“As the economic recovery continues, we’re anticipating further dividend increases, with payouts reaching 85% of their 2019 levels,” said Janus Henderson head of Australia Matt Gaden. 

“The dividend bounce back should be a big relief to Australian investors, particularly self-funded retirees.”

Mining carried Australia’s dividend boost in Q1

Janus Henderson noted that Australia looks more like an emerging market than a developed economy.

This is due to the ASX’s reliance on the mining sector, which single-handedly led the dividend boost in the quarter ending March.

Fortescue Metals Group Limited (ASX: FMG) almost doubled its distribution and became Australia’s largest payer in the first quarter,” the investment company stated.

“Including BHP Group Ltd (ASX: BHP)’s special dividend, mining payouts jumped 60% year-on-year in Australian dollars, with further increases signalled to arrive later in the year rounding off the 60% growth for mining dividends in calendar year 2021. Rio Tinto Limited (ASX: RIO) upped its payout by half in April, for example.”

Next sectors where you can grab that sweet dividend action

With mining already topping out and commodity prices starting to wane, where to next for ASX yield seekers?

Janus Henderson predicted another dominant sector on the ASX, banking, would be next to restore dividends to chunky pre-COVID levels.

“Banks [are] expected to likely to restore dividends to around 70% of their 2019 level,” the investment house stated.

“Janus Henderson expects healthy increases from defensive retailers like Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) too, but a number of other companies will find it harder to grow their dividends substantially — and some may pay nothing.”

A 40% growth in dividends this year would take payouts to $70.9 billion

“Our outlook clearly points to a dividend revival in Australia after a dividend drought last year,” said Gaden.

Janus Henderson portfolio manager Jane Shoemake warned investors to still expect plenty of uncertainty in a still uncertain world.

“There is certainly much less downside risk to payouts this year than previously anticipated, though the timing and magnitude of individual company payouts is going to be unusually uneven and this will add volatility to the quarterly figures,” she said.

“Special dividends will play a role too.”

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Returns As of 15th February 2021
Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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