The era of the 100% pay-out ratio is over. Here's why

In the abundance of themes coming into the last reporting season, there was really only one key issue for companies to cover.

“Margin pressure was the question everyone had to answer. To what extent they were feeling the effects of that, and it usually came down to how much your business was exposed to labour,” said Tyndall portfolio manager Michael Maughan.

Of the back of this, there were clear winners and losers across the sectors. Insurance was one winner, while the consumer discretionary space was an obvious choice for a more challenged sector.

But something else also became abruptly clear in the aftermath of reporting season, that being, the days of 100% pay-out ratios being over as businesses found capex costs increasing, particularly on the technology front.

In this interview, I discuss the key themes and the four companies we are monitoring with portfolio managers Michael Maughan and Jason Kim. One stock may even surprise you on the consumer discretionary side.

Timestamps:

• 0:00 – An overview of reporting season and the key drivers for downgrade expectations
• 1:54 – Exploration of the insurance sector as a sector winner
• 3:40 – The challenges in the consumer discretionary space and the stock that surprised markets
• 5:36 – The Big 4 Banks and the headwinds each faces
• 7:21 – Themes and outlook in the resources sector and the stock we find interesting in this space
• 9:24 – The Chinese economy and challenges in the property sector
• 10:27 – The outlook for earnings
• 13:31 – Sector and a company winner from labour constraints
• 14:40 - The company with a strong dividend outlook
• 15:23 – Margin pressures and outlook

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