Dividends no longer a stable for Australia

Generous dividend payments from Australian companies are amongst issues leading Australia to the brink of a divided spiral and potential recession, according Columbia Threadneedle Investments.

Statistics collected from Morgan Stanley for a Columbia Threadneedle report showed that Australia’s 200 biggest companies paid out around 73 per cent of earnings as dividends, comparative to 50 per cent in 2012.

“This has since grown and the 10 largest income payers account for approximately 50 per cent of the total ASX [Australian Securities Exchange] income,” the report said.

“There are also wider concerns about Australia’s economy. The country’s GDP [gross domestic product] contracted in the third quarter of 2016 for the first time in five years, prompting widespread speculation as to whether the country could be on track for a recession.”

In the wake of the contraction of the GDP in Q3 2016 for the first time in five years, the report backed stronger Asian nations including China and Malaysia, and even the US economy as best income sources for Australia.

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“Whilst in the investment manager’s view, Australia faces the possibility of entering a recession, other countries are already on the road to recovery,” the report said.

“The investment manager sees this upward trend as good news for US-based financial companies such as J.P. Morgan, Wells Fargo and regional bank BB&T which provide an attractive income to investors.

“By investing in a carefully curated selection of global companies, Australian investors will have the very best chance of achieving a steady stream of income, whatever the weather.”