Dividends accounted for more than half the growth of the Australian sharemarket over the past decade. The S&P/ASX 300 produced a total return of 7.8 per cent a year over the 2010s, with dividends accounting for 59 per cent of the total return.
Contributions from earnings growth and price-earnings ratio change were around 20 per cent each, according to a Macquarie Securities review of the decade.
The sharemarket return over the decade was a little below the long-term average, which is closer to 10 per cent.
Industrials were much stronger performers than resources stocks. The China-driven commodity boom ended in 2011 and resources stocks were de-rated.
Total shareholder return from resources stocks was 1.9 per cent a year over the decade, while industrials delivered 9.7 per cent a year, thanks to a combination of stock price re-rating and higher dividend yields.
The banks were also underperformers, with a total return of 7.4 per cent a year. Over the past five years bank share prices have been flat or in decline. Dividends made up 84 per cent of bank stock total returns.
The best stocks over the decade were blood products company CSL and Aristocrat Leisure, which both produced total returns of more than 800 per cent over the period.
Health was the top performing sector over the decade, with a total return of 18.7 per cent a year.
Macquarie is recommendation a rotation into resources, based on the record high PEs for industrial stocks and indicators pointing to better global economic performance this year.
The S&P/ASX 300 fell in two of the 10 years – 2011 (down 11.4 per cent) and 2018 (down 3.5 per cent). The proportion of down years is consistent with the long-term average of 23 per cent over the last 100 years.
The 2019 return, when the S&P/ASX 300 rose 24 per cent, was the second highest for the decade.
Last year’s market performance was marked by strong PE expansion in the health sector, which had a total return of 44.9 per cent, and IT, which had a total return of 37.4 per cent.
Financials were the worst performers last year, rising only 13.6 per cent.
Macquarie says the ASX has become an increasingly defensive market, with the index weight for bond proxies, such as real estate investment trusts and utilities, increasing steadily through the decade.
“This shift has been supported by a general decline in interest rates and slowing global growth,” the Macquarie report says.
Some of the high performing bond proxies over the decade included Goodman Group, Sydney Airport, APA Group, Spark New Zealand, Transurban, Dexus and Mirvac.