“Goldman believes the dividends can be sustained even though it expects this year’s earnings forecasts may slip and even if economic conditions don’t improve,” according to CNBC.
The bank may be right about the sustainability of Australian dividends. The previously strong Australian dollar made it difficult for Australian firms to reinvest in their businesses, but the CurrencyShares Australian Dollar Trust (NYSEArca: FXA) is down 6.1% in the past three months, providing some relief to Australian exporters and perhaps some assurance to skittish income investors eying Australia.
And there is still dividend opportunity left in the world’s 12th-largest economy. Goldman previously forecast dividend hikes from Australia’s largest financial services firms. That sector accounts for 50.1% of EWA and almost 20% of AUSE.
Goldman said the downtrodden mining sector could surprise with dividend hikes this year due to payout ratios that are well below the national average. AUSE and EWA have materials sector allocations of 14.2% and 18.9%, respectively.
WisdomTree Australia Dividend Fund