ASX dividend shares are under the spotlight this reporting season as payouts are scrutinised.
There is a lot of investor attention on the economic situation locally and globally with how strong inflation is around the world and how heavily central banks are responding with interest rate rises to bring it under control.
Dividends are a way for businesses to reward shareholders. They can also be an insight into how management and boards are feeling about the outlook and whether they need to hold onto more cash for the next year.
The broker Macquarie has been looking at how businesses have been reporting compared to expectations. Payouts have reportedly been noticeably "disappointing" from some ASX dividend shares, according to Macquarie.
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Expert views on ASX dividend shares this season
According to reporting by The Australian, Macquarie noted that earnings per share (EPS) during this reporting season have exceeded consensus estimates by less than February; dividends are not reaching consensus; and guidance is "generally soft".
Macquarie said of the 55 ASX companies that reported last week, a third beat its estimates while a fifth underperformed. This was a beat-to-miss ratio of 1.6x, down from 2.3x in February. The ratio for the overall reporting season is 1.8x.
Another element that could be worrisome is that twice as many consensus estimates for FY22 and dividends have been downgraded for as many that have been upgraded, according to The Australian.
Macquarie's Matt Brooks discussed the performance of ASX dividend shares, saying:
Given earnings are above expectations it is somewhat surprising dividends are missing. Often dividends hold up better than earnings as payout ratios are flexed to account for temporary earnings challenges.
That said, paying out less makes sense given the risks to growth and the challenges created in the inflationary environment.
Given macro headwinds, we expected guidance to be conservative and some have set expectations at a level they can beat, but the number of stocks with disappointing guidance is high.
We still think it is hard to make a bull case for stocks when valuations are already high, we are early in an earnings downgrade cycle and the Fed/RBA are likely to tighten further to slow inflation.
Dividends are growing
While Macquarie noted that some dividends may have been less than was hoped for, a number of the biggest companies have delivered higher payments to shareholders.
BHP Group Ltd (ASX: BHP) increased its FY22 dividend by 8% to US$3.25 per share.
Telstra Corporation Ltd (ASX: TLS) increased its final dividend by 6.25% to 8.5 cents per share.
Commonwealth Bank of Australia (ASX: CBA) upped its FY22 annual dividend by 10% to $3.85 per share.
In Australian dollar terms, CSL Limited (ASX: CSL) raised its dividend by 6% to A$3.11 per share.
However, Rio Tinto Limited (ASX: RIO) decreased its interim ordinary dividend by 29% to US$2.67 per share.
