Dividend bonanza to lose its zing on COVID aftershocks

Mr Warnes expects major players in the retail sector that benefited from the pandemic – JB Hi-Fi and Harvey Norman, for instance – to “pay strong dividends” in 2022.

Tribeca Investment Partners portfolio manager Jun Bei Liu agreed that 2022 payouts would be overall lower than what was seen in 2021, but would still be a “very, very good outcome” compared to the rest of the world.

“The retail sector is one I want to point to for potential dividend surprises on the upside,” Ms Liu said.

“So far, we haven’t seen significant cash return from retailers – we’ve seen some – but there will be more … We think by February-March, you should start seeing retailers talking about it, and by August next year we’ll see pretty strong dividend returns.”

As the world struggles to reset to a ‘new normal’ after the COVID-19 crisis of 2020 and 2021, many companies will remain wary of volatility in the market in the form of ongoing supply chain disruptions.

While Ms Liu doesn’t expect any nasty surprises in 2022, any escalation in geopolitical tensions will ripple through the market and make investors cautious.

“The minute the market becomes more volatile, corporations will try to hold on to cash. They won’t pay it out,” Ms Liu said. “It’s only prudent. So, this is something that will weigh on corporates’ intention of paying out dividends.”

On the other side of the spectrum, Mr Warnes said the travel, hospitality and events industry were still “on their knees” and highly unlikely to be issuing substantial payouts in 2022.

An increasing focus on sustainability, and investor and shareholder pressure for companies to make net zero pledges, will also impact investor dividends, he added – though this will be a very long-term trend, unlikely to be felt in 2022 or even in the next five years.

Companies must spend millions and in some cases trillions of dollars to undergo a ‘green’ transition, Mr Warnes said. “It costs money to do it. It’s going to have inflationary effects, and the cost of doing business is going to increase.

“If that can’t be passed onto customers, then someone’s going to carry the bag.”

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