Plato Investment Management tips ASX dividend yields to rise in 2022

It’s been a tough couple of years for ASX investors searching for dividend yields but Plato Investment Management tips 2022 to be better.

The uncertainties of COVID-19 caused many (but not all) companies to pull back or even stop distributions to shareholders even if they were profitable. And turning those taps back on has been a notably slower process.

But Plato Investment Management thinks 2022 will be a positive year. The fund manager, which is a brand of Pinnacle Investment (ASX:PNI), has set a target of 10% gross income from Australian equities in FY22 – which is the highest level it has set since FY19.

The company credited off-market buybacks (such as from CBA (ASX:CBA) and Woolworths (ASX:WOW)) and a robust Australian economy – at least in the most important sectors for ASX investors.

“Across the world, there appears to be little political appetite for widespread lockdowns in the foreseeable future and while variants bring uncertainty, we feel the strong economic bounce-back we’ve seen over the past year is sustainable,” said Plato co-founder and senior portfolio manager Peter Gardner.

ASX sectors which could deliver higher dividend yields

Gardner named resources, financials and retailers as sectors for ASX investors seeking dividend yields to watch.

“When you look at Financials, a return to pre-COVID levels of dividends looks likely over the next year and many of the leading banks have robust balance sheets,” he said.

“The retail sector is another area that could generate strong income in the second half of the financial year. We expect strong retail trading over Christmas to benefit select retailers such as JB Hi-Fi (ASX:JBH) and Super Retail Group (ASX:SUL).

“And while the retraction in the iron ore price has worried investors, we’ve seen companies such as BHP (ASX:BHP), Rio Tinto (ASX:RIO) and Fortescue (ASX:FMG) generate exceptional cash and franking credits for investors in recent months and many of these strong companies remain highly profitable.

“Looking ahead, there will be further tax-effective income opportunities in the sector. In particular we think the BHP and Woodside (ASX:WPL) merger could result in BHP’s petroleum assets being spun off in the form of a special dividend with franking credits attached, in order to merge with Woodside.”

“We do think investors are in the midst of a bonanza year for dividends. To take full advantage of the potential yield on offer, they need to ensure their portfolios are actively managed and optimised to maximise after-tax returns. “