by Jamie Hannah, Deputy Head of Investments & Capital Markets
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.
