Why bother dividends if you are poised to make more capital losses in bank stocks in the weeks and months ahead. No interest no dividend, live on capital and use capital to buy stocks at big bargains that would be coming with patience.
I cautioned bank holders in second half of last year here to ditch the Chase the yield game because I saw bank stocks falling ahead. And they will likely get back to close to GFC levels.... dont forget they have been capitalised since then and will be converting their hybrid bonds into more equity very soon.
Bank half-year results a nail-biter for retirees James FrostFinancial Services Writer AFR
Apr 15, 2020 – 4.25pm
The upcoming first-half reporting season for ANZ, Westpac and NAB will be a nail-biter for almost amillion retirees who rely on bank dividends for income, according to shareholder groups and seniors advocates.
Australian Shareholders Association chairman Allan Goldin said members, including self-funded retirees and those on part pensions, were increasingly concerned with the possibility that bank dividends may be suspended.
"These payments we are talking about, it’s what they live on, they aren’t being used to take overseas holidays," Mr Goldin said.
"If the banks don’t have the ability to pay a full dividend, that’s fine, nobody wants them to go bust, but pay a smaller one and make it up later on when you can."
Dividends paid by Australian banks represent around one third of the total dollar value of dividends paid by ASX companies however many retail investors are overweight the big four banks leaving them dangerously exposed.
The Australian Shareholders Association’s Mr Goldin said that if the banks didn’t pay a dividend, some retirees would be forced into riskier products and would potentially rob their offspring of an inheritance.
"There will be a big increase in interest in reverse mortgages," Mr Goldin said.
A survey conducted by National Seniors Australia earlier this month about the COVID-19 crisis, before APRA’s edict, found that anxiety about the erosion of retirement income was second only to being unable to source groceries.
National Seniors Australia chief advocate Ian Henschke said many retirees who were already being squeezed by record low interest rates would be facing a lean winter if the banks elected to delay paying shareholders.
"They use it for living expenses. These are not luxury items," Mr Henschke said.
"When we talked to people last year around the time of the franking credit debate they said the little bit of extra money they got was used to pay things like private health insurance, for hearing aids, dental bills, car maintenance and paying rates." Mixed messages
BOQ CEO George Frazis told analysts the APRA-devised tests that would allow banks to pay a dividend were "months away". However, the bank’s chairman Patrick Allaway wrote to shareholders on Tuesday to reiterate the bank still expected to pay a dividend, albeit at a much lower level.
UBS analyst Jonathan Mott cut his forecasts for first-half dividends from ANZ, Westpac and NAB to zero on the back of the announcement from APRA, asking how it was possible to stress test a bank when half the country was temporarily employed by the government.
Mr Mott said on Wednesday that the additional COVID-19 provisions for Westpac's first half may be $1.25 billion, or about double the size of the charges revealed on Tuesday, but did not express a high degree of confidence in his forecast.
In the US on Tuesday evening two of America’s biggest banks hiked their expected losses for the quarter substantially, with Wells Fargo raising its loan loss provisions by 350 per cent to $US4 billion ($6.3 billion) and JPMorgan raising its own provisions by 450 per cent to $US8.3 billion.
