Due to weak global demand, Australian mining companies are trimming costs and could come under pressure from investors to use some of that conserved cash to bolster payouts, Bloomberg reports. Those firms include mining giants BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RIO). EWA allocates 18.5% of its weight to the materials sector.
AUSE features a weight of 14.1% to materials names. One reason Australian companies have not been shy about raising dividends is the strong Australian dollar makes it difficult for these firms to reinvest in their businesses. Earlier this year, Goldman Sachs said Australia’s mining sector could surprise with dividend hikes this year due to payout ratios that are well below the national average. That was after the bank forecast dividend hikes from Australia’s largest banks. [Keep an Eye on Australian Dividends]
Financial services stocks account for almost 50% and 20% of EWA and AUSE, respectively.
Foreign investors already know about the allure of Australian dividends. About $9 billion of the country’s payouts through the third quarter of 2013 went to foreign investors, Bloomberg reported, citing the Australian Bureau of Statistics.
