Leading into the earnings reporting season, a lot of analysts are questioning whether AUS companies will hold their dividend yields... Credit Suisse has come out with the report recently that the dividend yield (DY) strategy has not been working in the last couple of years. We believe this is usually the case during the middle of a bull market cycle. Now that the market has fallen significantly, it may be a time to consider this strategy. Consider WPL, ORG and BHP that have DY of >10%. Will these companies hold their dividends post their FY results? Unlikely...... However, there is certainly some compelling value approaching at these levels...
Comments
Warwick SItana
Resource/Mining companies will struggle to service their debts in the face of declining commodity prices. In particular companies like BHP, RIO & others with a progressive dividend policy may find the exercise unsustainable over the long run & as a result trim their dividend payout. I think the banks are also at risk of reducing the dividend payout as the age of cheap debt comes to an end. Cheers WS