Blue chips won’t see further dividend growth

Justin Braitling

Watermark Funds Management

As interest rates have fallen forcing investors to look for yield in risk assets, income has been re-rated versus growth. We believe this re-rating of income generating assets has run its course. Low growth, mature share markets like ours are looking expensive relative to others with stronger growth prospects. You can see this from the recent underperformance of the ‘magnificent seven’ leaders: the banks, Woolworths, Wesfarmers, and Telstra. Having led the bull market since the GFC, they now appear to have rolled over. The companies have responded to these pressures by pushing up payout ratios and returning more earnings to shareholders. Investors should consider the growth they can expect in dividends from here, in many cases the dividends might be at risk. One bank, in particular, is prepaying tax to frank its dividends; this is also unsustainable. The sustainability of dividends is clearly a question all investors should be examining closes. Some companies are paying out too much and re-investing to little.


Justin Braitling
Chief Investment Officer
Watermark Funds Management

We are active, high conviction investors in Australian shares. As an absolute return manager, Watermark offers a proven alternative to traditional institutional funds.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.