It's been a wonderful time to own certain ASX dividend shares, particularly ASX bank shares. Have you seen how much those ASX financial shares have risen?
In 2024, we've seen:
- The Commonwealth Bank of Australia (ASX: CBA) share price has risen 39%
- The National Australia Bank Ltd (ASX: NAB) share price has leapt up 22%
- The Westpac Banking Corp (ASX: WBC) share price has soared 39%
- The ANZ Group Holdings Ltd (ASX: ANZ) share price has jumped 12%
However, it has been a completely opposite performance this year by the major ASX iron ore shares:
- The BHP Group Ltd (ASX: BHP) share price has dropped 17%
- The Fortescue Ltd (ASX: FMG) share price has fallen 32%
- The Rio Tinto Ltd (ASX: RIO) share price has declined 9%
So, what could happen next year in 2025?
We're going to look at some Comments from Darren Thompson, head of asset management at Equity Trustees Asset Management.
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Expert views on ASX dividend shares
Thompson and his team believe that total earnings for S&P/ASX 200 Index (ASX: XJO) stocks in the 2025 financial year will be "flat to slightly down" compared to FY24.
He acknowledged that the outlook for both earnings per share (EPS) and dividends per share for the domestic market is "heavily weighted" to the performance of ASX bank shares and ASX mining shares.
He believes that banks will find it difficult to grow profit in the current environment, saying:
Bank earnings are anticipated to be broadly flat due to a combination of modest credit growth, ongoing competition restricting net interest margins, ongoing cost pressures and already cyclically low bad debt provisions.
However, it could be harder for the ASX mining shares of BHP, Rio Tinto and Fortescue to maintain their earnings and dividends because of the low iron ore price. Thompson said:
These companies remain highly profitable, cash generative business. It is simply that iron ore prices have continued to retrace from previous cyclical highs, largely due to lower demand from China…
Thompson did acknowledge that outside of banks and miners, "many sectors of the Australian market are expected to deliver earnings and dividend growth going forward."
But the problem is that these companies do not have the same clout within the ASX 200 as the banks and miners do. He also pointed out that ASX energy shares face challenging circumstances, with lower energy prices than in the past few years.
Thompson concluded his thoughts on ASX dividend shares with the following:
The impact of these factors is such that the Australian equity markets 12-month forward dividend yield is ~3.4%, which is well below the 10-year average.
In aggregate, the outlook for near term earnings growth remains weak. This does not seem consistent with the current level of market optimism and as such we feel that capital returns over the next 1 to 3 years are likely to be more muted than those enjoyed in the last 12 months.
So, it seems investors may need to be selective if they want to own ASX dividend shares that increase their dividends in FY25 and the next few years.
