CRITERION: Divvies are down... but still better than what you'll get from the banks

Ah, Spring! Swooping magpies, the heady aroma of cut turf, blooming roses and a welcome shower of dividend payments from our trusted blue chips.

According to Commonwealth Securities, $32 billion of payments are being dispensed in the August to September payment season – 24 per cent down on a year ago but welcome manna from the heavens nonetheless.

The miners shaved their payouts as commodity prices eased, but the financials were solid.

Despite the noise about housing and delinquencies, the Commonwealth Bank of Australia (ASX:CBA) upped its full-year payout to $4.50 per share, 17 per cent higher.

Reflecting boardroom caution, companies reduced their dividend payout ratios – the portion of earnings distributed to shareholders – to 62 per cent, compared with 72 per cent previously. Still, 87 per cent of the ASX 200 stocks declared a payout.

Based on current share prices and expected dividends for the 2023-’24 year, Commsec estimates the market is trading on a yield of 4.06 per cent, slightly below the long-term run rate of 4.7 per cent.

When the value of dividend franking is considered, this ‘grossed up’ yield rises to 5.7 per cent, compared with 5.1 per cent for the best government-guaranteed but fully taxable bank term deposit.

In its regular review of the top 100 high-yield stocks, Canaccord ranks wealth manager Insignia Financial (ASX:IFL, formerly IOOF), as the top payer, on a forward yield of 11.4 per cent and a grossed-up yield of 12.7 per cent.

The other double-digit dividend dazzler is Bank of Queensland (ASX:BOQ), with a forward yield of 7.1 per cent, grossed up to 10.1 per cent.

Perpetual (ASX:PPT), Bendigo and Adelaide Bank (ASX:BEN) and Cromwell Property (ASX:CMW) yield just under 10 per cent, after tax.

Double digit yields tend not to be sustainable so look out for the dividend traps, especially among the miners.

The sixth best yielder six months ago, Fortescue Metals (ASX:FMG) now ranks 44th best, having cut its full-year div by 15 per cent in 2022-’23. Still, Twiggy Forrest delivers a 6.8 per cent grossed-up yield – far less than his CEO attrition rate but attractive nonetheless.

Whitehaven Coal (ASX:WHC) was the top dividend play six months ago but now ranks 46th on 7 per cent, with expectations the miner could cut payouts in favour of buying BHP’s two Queensland coal mines that are up for sale.

Fellow coalie New Hope Corp (ASX:NHC) last week revealed a bumper $1 billion profit and a dividend equating to an 11 per cent yield. But once again, there’s a vibe that things are as good as they will get for the miners of the black gold.

Despite its bumper $1.74 billion full-year profit, Qantas (ASX:QAN) did not pay a dividend and is not expected to do so this year. Instead, the airline launched a $500 million share buyback having acquired $1 billion of its own stock last year.

Unlike other aspects of the airline’s behaviour, there’s nothing wrong with buybacks, given they boost earnings per share and future dividends on the remaining shares.

But some investors expected Qantas would resume dividends, given the airline was a reliable payer pre-pandemic. It’s the same disappointment felt by frequent flyers realising their points will only get them Dublin, South Australia rather than the Irish capital.

Other companies are dividend heroes only because their share valuations have been trashed. Take the agribusiness Elders (ASX:ELD), which trades on a handsome 6 per cent yield after losing 50 per cent of its value over the last year.

The stock might now be attractive as a turnaround play – El Nino willing – but the dividends are cold comfort to existing holders who have seen $1 billion of capital value disappear down the back paddock.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.