“Not surprisingly, financial services and property companies fell off the top dividend payers when COVID-19 hit, given the expectation they would preserve cash to counteract the impact of COVID-19 on their underlying businesses,” says one analyst.
The EY tables compare the top dividend-yielding companies in the S&P/ASX 100 index after the full-year 2020 reporting season (which reflects the peak six-month COVID-19 period starting in February) and what the market is expecting in the next 12 months (or the recovery period). The yields are based on six months of dividend payments.
Sectors and companies most affected by the government-ordered closure – such as shopping centres, retailers, toll roads, consumer discretionary housing and construction – “will be the first to bounce back”.
“This can lead to the dividend trap,” warns an analyst. “That’s where the dividend looks terrific because the current share price has fallen significantly. If the fall is because professional investors have determined that the company profits are compromised, then there go future dividends.”[