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Author Bio
James Mickleboro is an investment writer and analyst who has worked with The Motley Fool Australia for 10 years, covering ASX shares, market news, broker research, dividends, growth stocks, and long-term investing ideas.
Over that time, James has written extensively about Australian equities and developed a particular focus on helping everyday investors understand the stories behind share price moves, company announcements, broker views, and broader market trends.
His best investment recommendation was identifying Afterpay while it was still a small-cap growth share, before its rise into one of Australia’s biggest technology success stories. His worst investment lesson came from CSL Ltd (ASX: CSL), where he was burnt by believing management could turn the business around sooner than the market ultimately allowed.
Areas of Expertise
ASX shares
Growth and dividend investing
Broker research
Interpreting company announcements
Market news
Portfolio strategy
Long-term wealth creation
Education
Bachelor of Politics, Philosophy and Economics. CFA Institute
Social MediaLinkedIn
James is the founder of Evermore Asset Management, which focuses on undercovered global stocks.
Favourite Investment Quote
"It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
— Warren Buffett
Published
ASX dividend shares can be a wonderful source of income. But what happens when the economy turns against the companies paying them?
I wanted to find out, so I've put five popular ASX income shares through a hypothetical recession to see which dividends might hold up and which could be cut.
I started with Telstra Group Ltd (ASX: TLS) and Coles Group Ltd (ASX: COL), which provide services and products Australians need every day.
But what about BHP Group Ltd (ASX: BHP), which depends heavily on commodity prices, or JB Hi-Fi Ltd (ASX: JBH), which sells products customers can often put off buying?
I also included banking giant Westpac Banking Corp (ASX: WBC), where rising unemployment and mortgage stress could threaten earnings.
For this exercise, I've imagined a difficult 12 to 18 months, with weaker consumer spending, rising unemployment and falling commodity prices. I've then estimated how these conditions could affect earnings and dividends.
Image source: Getty Images
Telstra: Could its dividend survive?
Telstra looks like a natural place to start. Most households aren't going to cancel their phone services just because money gets tight.
That gives Telstra a more dependable source of revenue than many other ASX businesses. But dependable revenue doesn't automatically guarantee a dependable dividend.
The company paid 21 cents per share in FY 2026. That represented approximately 82% of its cash earnings, leaving some room for profits to decline.
In my recession scenario, I've assumed an 8% decline in cash earnings. Some customers might switch to cheaper plans, business spending could slow, and costs could become harder to offset.
Under those conditions, Telstra could still maintain its 21-cent dividend, although it would be paying out almost 90% of cash earnings.
That wouldn't leave much room for error, especially while the company continues investing in its network. Nevertheless, I think Telstra could protect its dividend through a moderate downturn.
That's a fairly reassuring result. But the other four ASX income shares tell a more complicated story.
In my calculations, one familiar dividend payer could reduce its annual payment by more than a third. And even a market-leader might struggle to maintain its dividend.
Here's what I found.
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