The dividend payments arrive as the market hovers just above a three-month low, leaving investors to ponder whether to take the cash, reinvest or search for a better yield outside equities.

Investors looking for more dividends will have to be particularly careful about where they search for yield in the future, with the reduced or scrapped dividends from the major banks proving they are no longer the sure-fire income plays they once were.
“The banks will pay something. ANZ paid a catch-up and Westpac is pretty likely to pay a dividend but there just wont be as much coming from the banks as weve seen in previous years,” Mr Dive said.
JPMorgan Asset Management’s Kerry Craig. 
“In 2019, we had a pretty good idea what they were going to pay but there’s a few more questions now. You saw that with Commonwealth Bank, analyst estimates for their dividend was all over the shop. It’s very difficult to pick.”
Income across asset classes has been drying up for the last few years and investors could be forced to deploy their cash outside the equity market.
“In the long run, the outlook for income from bonds and even equities is challenged,” JPMorgan Asset Management global market strategist Kerry Craig said.
“Central banks have been the heroes for those looking for capital gains and the villain for income seekers. More and more investors will look to the stability of income that comes from core real assets, things with regulated or contracted income and less susceptible to the economic backdrop.”
Dividend reinvestment plans (DRPs) have been offered at steeper discounts than usual in a bid to encourage investors to remain within the equity market. Mr Dive said this had meant his fund had participated in more DRPs than usual.
BHP Group is set to push $2.2 billion into investor bank accounts this week and investors could be encouraged to reinvest those returns in the miner, given iron ore prices have remained firm well into the second half of the year.
Commonwealth Bank and ANZ will pay out $2.4 billion between them next week, well below the $6.4 billion they paid a year ago.
Telstra will pay investors $952 million, although there are doubts over whether the telco will be able to maintain its dividend, given its own earnings predictions are below the level it needs to be to maintain its 16¢ a share payout.
The telco’s shares are trading close to their weakest level since December 2018, falling heavily through the last month, in line with broad falls across global markets.
The weakness in equity markets has been driven partly by disappointment that further support from the Federal Reserve and Congress hasn’t been forthcoming.
Markets rallied hard through late March and April, driven by a $US2.2 trillion fiscal package from Congress and the cutting of the Fed funds rate to zero. However, further stimulus hasn’t been forthcoming, with negotiators failing to find common ground on a second deal.
Fiscal stimulus will return to the forefront this week, with Federal Reserve chairman Jerome Powell set to front the House Financial Services Panel and the Senate Banking Committee in the next few days.
“Powell will probably say fiscal support has been important and will continue to be important and that will be his way of sending a message that these protracted negotiations on this are not helpful,” GSFM investment strategist Stephen Miller said.
“Markets are looking at this, sitting around waiting for Congress to agree on a fiscal package. It looks as if the economy does need a little bit of help and the prospects on the fiscal side arent that good.”
Locally, stimulus will also be key to markets going forward with the Australian budget, set to be released on October 6, likely to provide a strong boost to the domestic economy.
The government’s COVID-19 fiscal stimulus has proved so effective in assisting corporate balance sheets that companies have used it to pay company bonuses and return profit to shareholders through dividends.
Macquarie analysts are forecasting dividends in the 2021 financial year to increase the most in the discretionary and technology sectors, while financial and mining should see small increases to their dividends.
Overall, dividends inside the S&P/ASX 300 Index are only expected to increase by 1 per cent, with dividends inside the S&P/ASX 100 Index set to fall by 4 per cent.
“Our teams forecast imply dividend growth of 4 per cent in FY21, which would be a small rebound compared to the 33 per cent jump in dividends in FY10 [following the global financial crisis],” Macquarie analyst Matthew Brooks said.
“For a stronger rebound in FY20 dividends to occur, the banks would need to pay higher dividends, which would be dependent on the level of bad debts and their balance sheet.”