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Investors rewarded with bumper dividends, buybacks

Buybacks benefit shareholders as, with fewer shares in circulation, earnings per share improves as do dividends per share. Buybacks should also be positive for a company’s share price.

The big-four banks’ share registers are packed with small investors, particularly self-funded retirees looking for income.

The Commonwealth Bank intends to buy back $6 billion worth of its shares. ANZ and NAB have also announced smaller buybacks, while analysts expect Westpac to unveil a buyback later this year.

Peter Warnes, head of Australian equities research at Morningstar, says although dividends are up, much of that is the resumption following last year’s cuts and deferments. “While this earnings season is reasonable, you are comparing it to the devastation of a year ago,” he says.

Warnes says shareholders should not become beguiled by the elevated payouts, as he does not think they are sustainable in 2022.

Earnings scoresheet

  • Telstra posted a small rise in full-year profit – in line with analysts’ estimates.

Chief executive Andy Penn said the company is on track to grow its earnings next year for the first time since 2017. The gains would be backed by improved performance in its mobile division and as headwinds from the National Broadband Network subside.

The telco will buy back $1.35 billion worth of its shares, which is about half the proceeds from the part sale of InfraCo Towers.

  • Sales at supermarket giant Woolworths rose about 6 per cent on the back of more grocery purchases by shoppers during the pandemic.

The company’s net profit jumped about 30 per cent over the 12 months to June 27. Its Big W division was a big improver.

Shareholders will be paid a final dividend of 55 cents a share, up from 48 cents last year, and will also be able to participate in a $2 billion share buyback.

In a sign of optimism on the outlook of the country’s biggest bank, it raised dividends and slashed charges for soured loans, as cash profits rose by one-fifth to $8.65 billion for the financial year.

  • AMP reported a slide of in statutory profit for the half year to $146 million, down from $203 million last year, and announced no interim dividend would be paid.

The company experienced $6.7 billion in outflows from AMP Capital, its asset management subsidiary. However, AMP Bank’s profit jumped 76 per cent to $88 million, mainly due to the reduction in provisions for bad loans for COVID-19.

  • Wesfarmers, which runs major retail chains Bunnings, Kmart, Officeworks and Target, posted a bumper full-year result.

Earnings soared 16.2 per cent to $2.4 billion and revenue rose 10 per cent to $33.9 billion, as consumers’ spent more during lockdowns.

  • Qantas, as expected, reported a big decline in its full-year revenue – down 58 per cent – to just under $6 billion, from more than $14 billion in the same period a year ago.

On a positive note, the airline said it plans to resume international flying to COVID-safe destinations from December, once 80 per cent of eligible Australians are fully vaccinated.

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