SYDNEY, 30 March 2011 - Dividends are on the rise with the average dividend across the equity market growing 6.4% over the last six months, according to recent data from Russell Investments, provider of the Russell Australia High Dividend Index (the index).
“This reporting season has shown companies are increasingly confident about their prospects and as a result are more inclined to return capital to shareholders, either via dividends or buy-backs,” said Scott Bennett, portfolio manager for Russell Investments.
The index, which forms the basis for Russell’s High Dividend Australian Shares ETF (RDV), comprises Australian blue-chip companies with a bias towards those that have a high expected dividend yield but also meet other characteristics including: a history of paying dividends; dividend growth and consistent earnings.
Russell has recently completed the semi-annual reconstitution of the index, which involves incorporating the latest reporting season data to rebalance the weightings of stocks within the index according to certain dividend and earnings factors.
Commenting on the outlook for dividends, Mr Bennett said: “The dash to dividends is likely to become an even stronger theme in the year ahead with more companies looking to return cash to shareholders, along the lines of BHP’s buy-back.”
According to Mr Bennett, dividend yields are now looking as attractive as term deposits. The average term deposit is now yielding 6.1% while the average dividend yield across the ASX is now 5.8% grossed up for franking credits, with the index yielding 7.3% grossed up for franking credits.
“The main advantage over term deposits is with Australian equities you get long term growth in dividends and also your capital,” Mr Bennett said. “The recent correction in equity markets has presented a good buying opportunity for longer term investors.”
Strong yielders
The index has seen a number of movements this half including Harvey Norman which has entered the index at a weight of 1.8%. This reflects its attractive 6.7% gross yield and solid dividend growth, although Mr Bennett says Russell index methodology has also taken into account the cyclical nature of its business.
Defensive companies such as Fosters and Coca Cola Amatil have also increased their weighting, as did the banking sector after three of the top four banks posted double digit dividend growth in the past 12 months. “The proprietary Russell index methodology does favour those companies with more defensive earnings characteristics,” Mr Bennett said.
“This half has really shown investors that dividends are on a steady growth path and as a result dividends are going to be a really competitive source of income compared to other investments,” Mr Bennett concluded.
A list of the top 10 stocks in the index is included in Table 1 below. For further information please contact Honner Media.
Company |
Yield (Grossed up) |
BHP Billiton Ltd |
3.1% |
Commonwealth Bank of Australia |
8.4% |
Westpac Banking Corp |
8.4% |
Australia New Zealand Banking Group Ltd |
7.7% |
National Australia Bank Ltd |
8.6% |
Tatts Group Ltd |
13.5% |
Woolworths Ltd |
6.5% |
Wesfarmers Ltd |
6.1% |
SP AusNet |
17.9% |
Metcash Ltd |
9.3% |
About Russell
Founded in 1936, Russell Investments is a global financial services firm that serves institutional investors, financial advisers and individuals in more than 40 countries. Over the course of its history, Russell’s innovations have come to define many of the practices that are standard in the investment world today, and have earned the company a reputation for excellence and leadership.
Through a unique combination of wide-ranging and inter-linked businesses, Russell delivers financial products, services and advice. A pioneer, Russell began its strategic pension fund consulting business in 1969 and today is trusted by many well-known worldwide institutions for investment advice. The firm has US$155 billion in assets under management (as of 31/12/10) in its investment funds, retirement products, and institutional funds, and is well recognized for its depth of research and quality of manager selection. Russell offers a comprehensive range of implementation services that helps institutional clients maximise their assets. Russell provides leading administration and member services to over 220,000 individuals through its Australian Member Administration Centre. The Russell Indexes calculates over 50,000 benchmarks daily covering 65 countries and more than 10,000 securities.
Russell is headquartered in Seattle, Washington, USA with offices in Amsterdam, Auckland, Johannesburg, London, Melbourne, New York, Paris, San Francisco, Seoul, Singapore, Sydney, Tokyo and Toronto. For more information about how Russell helps to improve financial security for people, visit us at www.russell.com/au
The Russell High Dividend Australian Shares ETF tracks an index that is weighted towards companies that are expected to deliver dividends higher than the market average, however high dividends cannot be guaranteed.
Issued by Russell Investment Management Ltd ABN 53 068 338 974, AFS License 247185 (RIM). This communication provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. Any potential investor should consider the latest Product Disclosure Statement (PDS) for the Russell High Dividend Australian Shares ETF (RDV) in deciding whether to acquire, or to continue to hold, units in RDV. Only persons who have been authorised as trading participants under the Australian Securities Exchange (ASX) Market Rules can apply for units in RDV through the latest PDS. Investors who are not Authorised Participants looking to acquire units in RDV cannot invest through the PDS but may purchase units on the ASX. Please consult your stockbroker or financial adviser.
The Russell Indexes are trademarks of Frank Russell Company (FRC) and have been licensed for use by RIM. RDV is not sponsored, issued, sold or promoted by FRC and FRC makes no representation or warranty regarding the advisability of investing in RDV or in any of the securities upon which the Russell Index is based. FRC has no obligation or liability in connection with the administration, marketing or trading of RDV. FRC is not responsible for and has not reviewed RDV nor any associated literature or publications and makes no representation or warranty express or implied as to their accuracy or completeness. FRC does not guarantee the accuracy and/or the completeness of the Russell Indexes or any data included therein and FRC shall have no liability for any errors, omissions or interruptions therein.
Copyright 2011 Russell Investments. All rights reserved.
MKT/2905/0311
If you would like more
information about a press release
please contact:
SUSIE LAMBERT
Honner Media
susie@honnermedia.com.au
02 8248 3747
CRAIG MORRIS
Marketing Director, Australasia
Russell Investments
cmorris@russell.com
02 9229 5120
