Introduction
Dividend indices are one of the most widely recognized factor-based strategies. According to Morningstar, as of Dec. 31, 2024, there were over 400 dividend-focused exchange-traded funds (ETFs) worldwide, with more than AUD 990 billion in assets under management (AUM). Dividend ETFs had inflows of over AUD 98 billion in 2024. With over AUD 6.5 billion in AUM—or 30% of the Australian factor ETF market—the dividend factor is one of the most used in Australia.
In this paper, we will examine the Australian dividend market in depth and analyze the historical performance of the Australian high dividend yield strategy.
Australia Dividend Market
As one of the highest-yielding equity markets in the world, Australia has attracted extensive attention from market participants. As of Dec. 31, 2024, the trailing 12-month dividend yield of the S&P/ASX 300 was 3.5%, one of the highest among major developed markets (see Exhibit 1). ETF assets tracking dividend strategies in Australia have grown from AUD 571 million in 2012 to AUD 6.5 billion as of Dec. 31, 2024, with a compound annual growth rate (CAGR) of 22.5% (see Exhibit 2).
Through the analysis of historical data, we have observed three major characteristics in the Australian dividend market:
- A resilient dividend pool with a stable growth rate;
- The financials and the materials sectors contributed the majority of dividends; and
- A high level of dividend yield and payout ratio.
