Dividend yields expected to increase in 2021
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    Dividend yields expected to increase in 2021

    Jamie Hannah, Deputy Head of Investments & Capital Markets
    18 January 2021

    2020 will always be remembered as the year of COVID-19 and lockdowns. However, anyone monitoring their investments throughout 2020 would have been on a roller coaster ride. As shares fell sharply at the start of the pandemic, fear had overtaken normal market cycles as everyone tried to grapple with the lock-downs forced upon the global population. This fear drove the share prices down but also severely hampered dividends being paid as companies looked to hold on to excess cash in case of serious fallouts from the pandemic.

    There were companies listed on ASX that had gone ex-dividend and then pushed back their pay date of the dividend by many months. In the end some of these companies cancelled the dividend altogether. Those companies that hadn’t gone ex-dividend before the pandemic decided to hold back the amount they were declaring by lowering the cents per unit or deciding to skip the dividend cycle altogether. For any investor relying on income from dividends it was a tough year!

    2021 looks set to be a better year for dividend yields. There are indications that financials and A-REITs are set to increase the dividend payments in 2021 as many of them cut last year. With a plethora of market stimulus and low rates, many companies in this sector will benefit through growth opportunities, which will likely result in an increase in dividend payouts.

    From the peak of the market in February to the lows in March 2020, most A-REIT and financial companies have partly recovered. This is illustrated by our VanEck Vectors Australian Property ETF (ASX: MVA) and VanEck Vectors Australian Banks ETF (ASX: MVB) in 2020, as detailed in the table below.

    ASX Code


    Name

    High for 2020

    Low for 2020

    High to Low Fall

    End of Year

    End of Year Fall from High

    MVA

    VanEck Vectors Australian Property ETF

    27.3104

    13.5462

    -50.4%

    22.5497

    -17.4%

    MVB

    VanEck Vectors Australian Banks ETF

    28.5298

    15.262

    -46.5%

    24.2971

    -14.8%

    Source: Bloomberg

    However, if we look at some of the largest holdings in each of the funds and analyse the dividends paid out between 2019 and 2020 you can see a distinct drop in payment.

    ASX Code

    Name

    2019 Dividend per Share ($)

    2020 Dividend per Share ($)

    Financials

    ANZ

    ANZ Bank

    1.6

    0.6

    CBA

    Commonwealth Bank

    4.31

    2.98

    NAB

    National Australia Bank

    1.66

    0.6

    WBC

    Westpac Bank

    1.74

    0.31

    A-REITs

    SCG

    Scentre Group

    0.2216

    0.113

    MGR

    Mirvac Group

    0.124

    0.078

    SGP

    Stockland

    0.276

    0.219

    GPT

    GPT Group

    0.2648

    0.093

    Source: Bloomberg

    There are certainly risks in predicting the current environment with the ongoing pandemic, however it does appear that 2020 prudence in relation to payment of dividends might have been overdone.

    With share prices off their highs and dividend payments expected to increase it may be worth considering investments in the financial and A-REIT sectors for any portfolio looking for capital growth and yield in 2021. As always we would recommend you talk to a financial adviser about which investment is right for your needs.

    Issued by VanEck Investments Limited ACN 146 596 116 AFSL 416755 (‘VanEck’).
    This is general advice only, not personal financial advice. It does not take into account any person’s individual objectives, financial situation or needs. Read the PDS and speak with a financial adviser to determine if the fund is appropriate for your circumstances. The PDS is available here. An investment in MVA and/or MVB carries risks associated with: financial markets generally, individual company management, industry sectors, fund operations and tracking an index. See the PDS for details. No member of the VanEck group of companies guarantees the repayment of capital, the payment of income, performance, or any particular rate of return from any fund