The Wrap: Dividends, Retail, BNPL & Business Travel

Weekly Reports | Nov 19 2021

Weekly Broker Wrap: Dividends; retail; BNPL; banks and business travel.

- Australian dividend growth outpaces the rest of the world
- Which retail sectors will benefit from Black Friday sales?
- BNPL winners and losers 
- When will business travel fully recover?

By Mark Woodruff

Australian dividend growth outpaces the rest of the world 

BHP Group ((BHP)) will be the world’s biggest dividend payer in 2021, distributing $25.6bn in combined payouts from the UK and Australian divisions. 

This comes as Australian dividends are expected to show record growth of 60% in 2021, a rate around four times faster than forecast for the rest of the world, according to the Janus Henderson Global Dividend Index.

Banks were instrumental in this performance, after restoring dividends towards pre-pandemic levels, as were miners after capitalising on high commodity prices, explains Janus Henderson. More than 60% of Australia’s third quarter payouts were contributed by miners, after a tripling of year-on-year dividends.

Banks were assisted by the lift in prudential limits and lower-than expected loan impairments. The final dividend for Commonwealth Bank ((CBA)) was only down -12.5% from its pre-pandemic level, with ANZ Bank ((ANZ)) close behind. Meanwhile, payouts for National Australia Bank ((NAB)) and Westpac ((WBC)) are expected to be only -15% lower than pre-pandemic levels.

Of course it should be noted Australia’s relative payout strength reflects a rebound from a low base as Australian companies were among the worst hit last year. In Japan and the US, companies did not cut dividends by as much and consequently their payouts showed less growth than the global average.

Which retail sectors will benefit from Black Friday sales

Despite potentially less discounting during the end-of-year trading period, due to supply chain issues and inflation, ANZ Bank economists expect sales will be strong.

They expect improved labour market resilience and strong household deposits will result in end-of-year spending on retail more similar to elevated 2020 levels than the pre-covid years. Additionally, due to lingering reticence post recent reopenings, travel dollars will still be partially allocated towards retail.

To get a grip upon changing patterns for end-of-year non-food retailing spend, the analysts compare Cyber Monday and Black Friday. After exceeding Boxing Day spending for the first time last year, Black Friday is expected to the biggest retail sales day. Cyber Monday sales, which tend to be around 66-75% of Black Friday spending, are expected to be within the same range.

Potentially, last year's data may provide some clues as to which retail sector stocks may benefit this year. Along with last year’s pronounced jump in electronics spending on Black Friday, women’s fashion and hobby store purchases also boosted sales growth, points out ANZ.

[Black Friday is the day after Thanksgiving in the US, and Cyber Monday is the following Monday when online retailers offer discounts. A la Halloween, these US-specifc shopping events have insuinuated themselves into Australia via the influence of Amazon et al, and snapped up by local retailers as another promotional opportunity - Ed]

BNPL winners and losers 

Looking at the BNPL sector on a global basis, US-based Affirm Holdings has the highest gross merchant value (GMV), according to data compiled by Citi.

However, PayPal is catching up given its expanding geographical presence. The company generated GMV growth of 39% (the highest quarter-on-quarter rate), partly due to the launch of Pay in 4 in Australia. The company also intends to launch in Spain and Italy during the December quarter.

Meanwhile in the US alone, Affirm continues to have the higher GMV, after September quarter merchant sales of US$2.7bn, which compares to US700m and US460m for Zip Co ((Z1P)) and Sezzle Inc ((SZL)), respectively.

Shop Pay, powered by Affirm and available to all eligible Shopify merchants in the US, is driving Affirm’s growth, resulting in a material increase in active merchants for the September quarter. Moreover, Split Pay (Affirm’s Pay in 4 offering) has increased to around 12.5% of merchant sales in the September quarter from 6% in FY21.

Affirm has 102,000 merchants integrated as of September, compared to 44,000 for Sezzle and 17,000 for Zip Co. Also, given Affirm’s focus on larger-ticket items, the company’s spend per customer is double that of Zip Co and Sezzle.

The full story is for FNArena subscribers only. To read the full story plus enjoy a free two-week trial to our service SIGN UP HERE

If you already had your free trial, why not join as a paying subscriber? CLICK HERE