Chart of the Week: Aussie dividend yields are less attractive than alternatives
The latest insights from our equity research team.
This week’s chart comes from our equity research team’s latest Australian Dividend Outlook and Top Picks for Q4 2025.
Dividend yields low by historical standards
The yield on Aussie equities is below trend on aggregate.
The ASX 200’s dividend yield was around 3.3% at the close of November 2025 which is well below its 10-year average of 4.3%
The rise of growth stocks on modest yields, optimism around artificial intelligence, expectations for further US federal-funds rate cuts, and less severe US tariffs than initially feared stoked stock prices and depressed the overall equity market yield.
Income alternatives improve appeal
The average market yield for the ASX 200 is superficially less attractive than traditional fixed-income sources carrying lower risk, such as term deposits.
Dividend yields normally exceed those from fixed income, given equities bring higher risks. However, this relationship has changed since mid-2023. Expectations for rate cuts in 2025 attracted stronger risk appetite into equities, compressing yields. But equity dividends can grow as profits grow, an important consideration in inflationary environments.
An easing interest rate outlook in the medium term is likely to further dampen dividend yields unless corporate earnings growth compensates.
We expect distribution increases for most sectors
We expect around 56% of our coverage to raise distributions in fiscal 2026, and 75% in fiscal 2027. Average payout ratios should sit at about 65% for the next two fiscal years, roughly consistent with fiscal 2025.
Looking at different sectors, utilities, real estate, and communication services offer better prospects for steadier distribution growth. On the flipside, we think the materials and energy sectors are likely to face headwinds, commodity price volatility as always a key driver, while technology yields remain scarce.
The full report is available to Morningstar Investor subscribers and trialists.
You can find previous editions of Chart of the Week here.
