Yield or Dividend Growth? What ten years of ASX dividends actually paid

On 21 October, Sara Allen asked on Livewire whether Australia’s highest dividend companies are worth buying. Every income investor ends up asking that, and a yield table answers only half of it. It tells you what a company pays today. It doesn’t tell you whether that dividend will still be there in ten years, or how much bigger it will be.

But a yield table answers only half of it. A yield is a ratio, and it rises for two reasons: the dividend goes up, or the share price goes down. The screen doesn't tell you which, or whether the dividend will still be there in ten years. The dividend record does.

So we went back and checked. We took the dividend payers among the 300 largest ASX companies in October 2015, sorted them by the yield they offered that day, and followed them for a decade.

Our conclusion: a high yield paid more income, but it rarely grew. For every $100 invested, the typical high yielder paid $56 in dividends over the decade, against $35 for the lowest yielders. Yet 61% of the high yielders ended the decade paying a smaller dividend, against three in 21 of the low yielders. By the end, the high yielders' 6.2% starting yield was worth 6.3% on the original price, while the low yielders' 1.7% had grown to 4.7%. The dividends that grew belonged to companies whose earnings grew.

The analysis below starts with today's highest yields, then runs the test forward from 2015.

Behind today's highest yields

We took the 170 dividend payers in the S&P/ASX 300 with a complete record of their last ten annual reports, leaving out property trusts and funds, and sorted them into fifths by Bloomberg consensus forecast yield. Then we reviewed those ten reports, which cover nine years of change.

Forecast yield today

Among the highest yields, more than four in ten dividends have gone backwards: 44% of these companies pay less per share than they did nine years ago. More than a third have paid out more than their free cash flow in at least three of the past five years, which works for a while but not forever. The typical dividend in this group grew 1.5% a year, slower than inflation.

Two cautions. Cuts happen everywhere: 44% of the lowest yielders trimmed their dividend at least once outside the pandemic years, and 82% of the next-highest group did. A low yield is no guarantee either: 38% of the lowest yielders pay less than nine years ago. But the highest yields have the weakest growth and the most stretched payouts.

The ten-year test

A backward look at today's high yielders has an obvious flaw. Some of them are high yielders precisely because their share prices fell. So we ran the test forward. We took the dividend payers among the 300 largest ASX companies on 31 October 2015, 207 of them, sorted them by the yield they offered that day, and followed them to 31 October 2025. Another five, including ResMed and News Corp, paid dividends that year but have no dividend per share in our Bloomberg data, so they are left out.

The income figures use the 114 companies with ten complete, comparable years of dividends. The note under the table explains who is left out.

On income, the high yielders did what they promised. For every $100 invested, the typical company in the highest-yield fifth paid $56 of dividends over the decade, against $35 for the lowest. But 14 of those 23 high-yielders, or 61%, ended the decade paying a lower dividend per share than they started with. In the lowest-yield group, 3 of 21 did.

The middle group is worth a second look. Companies yielding 3.2% to 4.0% in 2015 paid $55 per $100 over ten years, almost as much as the highest yielders, and about a third as many ended with a lower dividend: 23%, against 61%.

Then there is what happened to the dividend itself. The highest-yield fifth started at a median yield of 6.2%. By the end of the decade, its typical latest dividend, measured against the 2015 share price, was 6.3%. It still paid more than the low-yielders, but only slightly more than at the start. The lowest-yield fifth started at 1.7% and ended at 4.7%, because its dividends grew 10.3% a year.

Yield in October 2015

And total return?

Here the answer gets less tidy.

On an equal-weight basis, $1 spread across the lowest-yield fifth in 2015 became $4.64 by 2025, against $3.09 for the highest-yield fifth and $2.52 for the S&P/ASX 200 Accumulation Index. Four of the five beat the index on that measure; the fourth fifth, at $2.48, fell just short. The typical company in every fifth did not.

Those averages rest heavily on single names. Pro Medicus turned $1 into $87 and accounts for almost half of the lowest-yield fifth's combined result; without it, that fifth's average falls to $2.63, close to the index. Fortescue plays a similar role in the second fifth. Take the single best result from each fifth, and all five land between $2.18 and $2.76.

The median company tells a different story. The typical low yielder turned $1 into just $1.23, and a third of them lost money. The typical high yielder turned $1 into $2.23, and 14% lost money. It is the same lopsided pattern Hendrik Bessembinder found across 90 years of US stocks: a few companies do most of the work.

Twenty-three payers whose dividend per share and cash dividends disagree are left out of every fifth. Placed by cash dividends instead, the typical high yielder still beat the typical low yielder, $2.03 against $1.06.

So a low yield is not a strategy on its own, any more than a high yield is. A third of 2015's lowest yielders lost money over the decade. What separated the dividends that grew from the ones that shrank?

Dividends followed earnings

Earnings. We took the 78 companies with ten complete years and a profit at both ends, and ranked them by growth in earnings per share.

In the two slowest-growing fifths, 75% and 67% of companies ended the decade paying a lower dividend than in 2015. In the two fastest-growing fifths, 0% and 13% did, and their dividends grew 8.4% and 13.5% a year. The rank correlation between earnings growth and dividend growth was 0.67.

A board can hold a dividend up for a few years by borrowing, or by paying out more than the business earns. Over a decade, the dividend goes where the earnings go.

Accounting professors Douglas Skinner and Eugene Soltes asked what a dividend tells you about the earnings behind it. Their finding was that the reported earnings of dividend payers are more persistent than those of other companies, and that the relationship was "remarkably stable over time" from 1974 to 2005. Dividend payers were also less likely to report losses, and the losses they did report tended to be one-off items (Skinner and Soltes, 2011, Review of Accounting Studies).

A dividend, then, is evidence about the business. A dividend that keeps growing is better evidence still.

Our own holdings

Eleven companies we hold today were in the 2015 test with complete records. Here is the same yield-on-original-price measure for each.

Lovisa yielded 3.2% in October 2015. Its latest dividend equals 22.9% of that 2015 share price. Rio Tinto went from 5.2% to 12.8%, CAR Group from 3.3% to 8.2% and Macquarie from 3.9% to 7.6%. Four of the eleven now pay more on their 2015 price than the highest-yield group's 6.3% median.

One doesn't flatter us at all. Corporate Travel Management's latest dividend is worth 0.9% of its 2015 price, below the 1.4% it yielded then. It has not declared a dividend since February 2025, after a UK overbilling problem, and its shares were suspended from August 2025 to September 2026. It is in the chart because it is in the data.

The obvious caveat applies. We own these companies today, so the list was chosen with hindsight, and it shows what dividend growth looks like when it compounds. That said, we held most of them in 2015 too.

What we take from this

Yield is a fair thing to want, but it is only as good as the earnings behind it. The highest yields of 2015 paid more income along the way, yet their dividends shrank while the low yielders' grew. Over ten years, the dividends that compounded belonged to the companies whose profits did.

So when we look at a dividend, we start with the business that pays it: what it earns, what it needs to reinvest, and what it is likely to earn in ten years. That leads to the question we take up next: which earnings keep growing?