Wry & Dry

RBA tips low rates as cause of high dividends? Nuh.

'Low interest rates may be driving demand for higher dividends rather than encouraging companies to take risks with more investments, a Reserve Bank study has found'.  The article is actually quite instructive and W&D recommends it to curious readers.

That Captain Obvious comment also suggested that the RBA is about 18 months behind the curve in understanding what is going on in the Australian economy.

Lazy dividends

Doubtless another RBA study in about 12 months time will conclude that low interest rates also caused a very high demand for higher interest bank-issued hybrid securities.

But W&D wonders why the RBA hasn't investigated the high correlation of companies' directors and senior executives bonus incentives being linked to TSR (i.e. Total Shareholder Return, part of which is the return from dividends) with high dividend payouts.  The article currently the object of W&D's gaze suggests this: the P/E ratio of companies with a dividend pay-out ratio greater than 75% is about 16.5.  The others below 15.

PE and Payout

QED?