The pandemic prompted many companies to be prudent with capital. With the depth and duration of a recession unknown, many ASX-listed shares battened down the hatches by suspending dividends and raising additional capital.
Thankfully, 16 months on and the Australian economy has enjoyed what some would describe as a 'V' shape recovery.
In a news release today, asset manager Janus Henderson Group CDI (ASX: JHG) revealed that it's expecting that much of these funds will flow back into the pockets of investors.
It pays to be thrifty
In the release, Janus Henderson points out that total global debt has barely budged since January 2021. However, in the year before, debt jumped 10% to a record $13.5 trillion – illustrating the sudden rebound in economic activity.
By Janus Henderson's estimates, a record-setting $5.2 trillion globally. The $1.1 trillion increase in 2020 was twice as much as the previous five years combined.
So then, with bountiful supplies of capital sitting on corporate balance sheets, the asset management anticipates a boom in capex, dividend payments, and share buybacks through the tail-end of the year and beyond.
Head of Australian fixed interest at Janus Henderson, Jay Sivapalan said:
Companies around the world have weathered the last 16 months with impressive skill. An investment boom is highly likely after the Covid-19 freeze. This will account for a large portion of the reduction in cash balances this year but share buybacks and higher dividends will be part of the story too.
ASX shares flicking back on the dividend dispenser
Leading broker UBS picked up the discrepancy between earnings and dividends earlier in the year. UBS analyst Pieter Stoltz noted:
There appears to be a disconnect between earnings and dividends that the market is missing at the stock level but is visible from the top down. We think analysts are assuming that companies will maintain payout ratios at low levels despite the improved outlook and improved balance sheets since the peak of the COVID crisis.
Additionally, UBS disclosed a handful of ASX shares that it consider to be top candidates for dividend upgrades. These included AusNet Services Ltd (ASX: AST), Bendigo and Adelaide Bank Ltd (ASX: BEN), Downer EDI Limited (ASX: DOW), OZ Minerals Limited (ASX: OZL), Spark Infrastructure Group (ASX: SKI), Suncorp Group Ltd (ASX: SUN), and Vicinity Centres (ASX: VCX).
Together with a declining payout ratio and an improving balance sheet, the broker considered these companies to be possible contenders with dividend revisions lagging earnings revisions.
Big four dividend dilemma
Janus Henderson is not the only ones forecasting big payouts. Similarly, analysts at Morningstar last week estimated there to be $34 billion of excess capital sitting on the balance sheets of the big four banks.
Equity analyst, Nathan Zaia noted his forecast that a portion of the capital will be returned to shareholders through off-market share buybacks over the next 12 months.
From there, Zaia expects boosted dividends between 2021 to 2024 for ASX bank shares. Investors will no doubt be keeping a close eye out for high-yielding, quality companies as dividends resume.