Since 2011, the Reserve Bank of Australia has cut rates by 225 basis points to 2.5%, which has helped lift Australian stocks and dividends. Australian companies paid $40.3 billion in dividends last year, nearly double the amount paid in 2013.
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).
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. [The Case for Australian Dividends]
AUSE and EWA have traded higher this year despite gains in the Australian dollar. Still, it is clear RBA has had some impact on the Aussie as the CurrencyShares Australian Dollar Trust (NYSEArca: FXA) has lost 8.3% over the past two years. Investors have pulled $62.7 million from FXA, perhaps a sign they expect more RBA rate cuts. [IMF Impact on Aussie ETFs]
iShares MSCI Australia ETF
